Munhwa Broadcasting Corporation and Ors v Young International 2009 Ltd and Anor Hc Ak

• Jurisdiction: New Zealand
• Judge: Potter J
• Judgment Date: 17 December 2010
• Docket Number: CIV-2010-404-00203
• Court: High Court
• Date: 17 December 2010

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-00203

BETWEEN

Munhwa Broadcasting Corporation

First Plaintiff

and

Television Broadcast Limited

Second Plaintiff

and

Korean Broadcasting System

Third Plaintiff

and

World Tv Limited

Fourth Plaintiff

and

Young International 2009 Limited

First Defendant

and

Young Hoon Cho and Yang Wook Ham

Second Defendants

Counsel:

J R Katz QC and E St John for the plaintiffs

J A McBride for the defendants

JUDGMENT OF Potter J

Table of Contents

Introduction	[1]
Parties	[2]
Plaintiffs' application for interim injunction	[5]
Principles applicable	[8]
Background
The system under consideration	[9]
Encryption and decryption	[13]
Use of servers	[20]
Retention/storage	[23]
Time shifting	[25]
Serious question to be tried
Causes of action	[26]
Copyright	[27]
Relevant statutory provisions: Copyright Act 1994	[33]
Have the defendants copied the copyright works?	[50]
Have the defendants ‘communicated’ the copyright works in breach of s 16(1)(f)?	[86]
Have the defendants made an adaptation of the works or copied or communicated an adaptation of the works?	[107]
Section 29 of the Copyright Act 1994	[110]
Section 228 of the Copyright Act 1994	[115]
Exclusive licence	[134]
Fair Trading Act 1993	[142]
The ‘Maneki’ decision	[146]
Balance of convenience	[151]
Undertaking as to damages	[156]
Overall justice
Delay	[193]
Other matters	[201]
Orders	[204]
Costs	[208]
Next Steps	[209]

Introduction

1 The plaintiffs seek injunctive relief against the defendants to restrain them from broadcasting material in New Zealand which the plaintiffs claim infringes the first to third plaintiffs' copyright in the material. The defendants deny that any copyright infringement is involved.

Parties

2 The first to third plaintiffs are foreign broadcasters. Munhwa Broadcasting Corporation (‘MBC’) and Korean Broadcasting System (“KBS”) are Korean broadcasters; Television Broadcast Ltd (“TVB”) is a Hong Kong broadcaster that transmits its broadcasts into Korea.

3 The fourth plaintiff, World TV Ltd (“World TV”), is a New Zealand company that broadcasts in New Zealand content it receives from MBC, TVB and KBS under license. World TV sells content to New Zealand subscribers, distributing through channels operated by the Sky Television network. World TV licenses from Sky television a number of channels for this purpose which subscribers in New Zealand can access on subscription.

4 The first defendant, Young International (2009) Ltd (“Young”) is a New Zealand company. Young operates a service or system they call Baro TV by which viewers in New Zealand can access certain broadcasts of MBC, TVB and KBS. The second defendants are its directors (and authorise and direct the actions of Young).

Plaintiffs' application for interim injunction

5 The plaintiffs allege that the defendants are advertising for sale, distributing and broadcasting material in New Zealand in breach of the plaintiffs' copyright in that material, and that the actions of the defendants do, or are likely to mislead and deceive the public. They say that Young through its Baro TV system iscircumventing World TV's right to broadcast in New Zealand content it receives under licence from the copyright owners MBC, TVB and KBS, and that because the defendants' system enables viewers to watch the same broadcasts without having to purchase a decoder and pay licence fees to Sky and World TV, World TV is suffering loss.

6 The plaintiffs' application seeks orders restraining the defendants, their servants and agents from:

• a) Distributing by any means within New Zealand material broadcast by MBC, TVB and KBS;

• b) Advertising, promoting, displaying, offering for sale or otherwise in trade or commerce within New Zealand offering to the public material broadcast by MBC, TVB and KBS;

• c) Using in trade or commerce within New Zealand the logos of MBC, TVB and KBS, or otherwise representing to the public that they are associated with those companies, their servants, agents, or subsidiaries.

7 Young undertook to delete the logos of the plaintiffs from its documentation and marketing material in New Zealand pending trial and it seems to be accepted that injunctive relief is not required in that regard.

Principles applicable

8 The principles are well established by the authorities of American Cyanamid Co v Ethicon Ltd1 and Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd.2 The Court must consider:

• a) Whether there is a serious question to be tried;

• b) Where the balance of convenience lies;

• c) The Court must then take a step back and consider the overall justice of the case.

Background

The system under consideration

9 Young's service or system, which they call Baro TV (and which will be called the Baro TV system in this judgment), operates in the following manner. Young arranges for certain broadcasts to be received in Korea. If the broadcast is a pay service, a fee for the subscription is paid by Young on behalf of each of Young's New Zealand customers. Those broadcasts are received in Korea by a device called a Digizon standard or Digizon STD, with each New Zealand customer either leasing or owning their own device. All of the devices are stored together in a warehouse or by a similar arrangement. Each customer in New Zealand also has a receiving device called a Digizon on TV device (either leased or owned). This device is connected to the customer's television set in New Zealand.

10 The device in Korea receives the local broadcast there. It is then sent to New Zealand via the internet, received by the customer's device in New Zealand, and viewed by Young's customers in New Zealand. The device in Korea digitises the signal that is sent, and the New Zealand receiving device enables the customer to view the content on their television. The broadcast is viewed in real time (there is no time shifting involved).

11 There appears to be agreement between the plaintiffs and the defendants that the system involves digitisation of the broadcast, which is received as an analogue signal in Korea.

12 Other aspects or asserted aspects of the system were the subject of affidavit evidence given by the plaintiffs' expert Mr Roger Randle, the defendants' expert Mr Mark Mulholland and also by Mr Cho a director of Young. There was disagreement on a number of aspects.

Encryption and decryption

13 There is an issue as to whether encryption and decryption are involved in the Baro TV system. The defendants state there is no encoding or decoding done by them. Mr Cho says in his affidavit sworn 30 April 2010:

The Digizon boxes do not encode or decode any signals. The sending box can be described as “an encoder” in that it uses “Codec” technology to compress the signal which carries the visual image … Likewise the set-top box can be described as a decoder in that it de-compresses the signal. But neither of the boxes is a “decoder” in the sense of (say) a Sky decoder, namely a device that accesses the signal.

14 Mr Randle disagrees with the above statement of Mr Cho. He states in his affidavit sworn 10 June 2010 that the system used by the defendants is clearly stated on the digital website of KCS (the company in Korea from which Young sources the Digizon brand device), as involving an encoder, and whenever data is encoded it must later be decoded to be humanly readable or viewable. He states that all these systems involve digitising the data (if it is in analogue format) and then encoding/compressing it to enable the data to be fed via the internet. He says that the Codec programme used to enable the data to be fed via the internet is a device for encoding the data that is to be digitally streamed. He says that Codec systems do not necessarily involve compression but in the case of a television broadcast this would be necessary. He says the defendants are allowing viewers to receive a signal that is digitised, encrypted and encoded (though possibly decrypted at the Korean end), with each channel received in Korea separately encoded, and the New Zealand device decoding and reformatting the broadcast into human viewable form.

15 Mr Mulholland says he agrees with all but a small part of Mr Randle's affidavit. He says:

For clarification it is important that a distinction be made between encoding/decoding data, in this case a digitised video stream, for encryption or for compression. These are quite different concepts …

16 He identifies that encryption is used for security and is a process that essentially converts or scrambles the data so that a specific key is required to convert or unscramble the data. (This is the process used by Sky TV). Compression, in thecontext of video, is used to “shrink” the large quantity of data involved in video to a smaller size for transmission over the internet.

17 Mr Mulholland says that the Sky TV service in New Zealand uses both encryption and compression and the Sky “decoder” box performs both functions.

18 In contrast, he says, there is no evidence that the Digizon units at either the Korean or New Zealand end provide anything else but encoding and decoding for compression. He expresses the opinion that the Digizon STD on TV units are incapable of decrypting an encrypted TV broadcast. However, he acknowledges there is no technical means available to remotely ascertain how the “sending” units in Korea receive the video stream to be compressed and sent to the clients receiving device in New Zealand and says he has not sighted the Korean technical platform used to provide...