Disney and other studios succeed in copyright case against Mr Video outlets

In an important decision handed down by the Cape High Court Disney Enterprises Inc., together with three other studios and their exclusive licensee, Nu Metro, were granted injunctive relief (and other relief) restraining Mr Video and twenty-two of its franchisees from infringing the copyright in various cinematograph films by importing and hiring out Zone 1 DVDs only intended for the North American market.

The main question before the Court was whether the conduct of Mr Video and its franchisees constituted direct infringement in terms of Section 23(1) of the Copyright Act 98 of 1978 read with Section 8(1)(g) which provides that hiring out a film is the exclusive right of a copyright owner.

Although Mr Video initially raised the defence of an implied licence, it abandoned this before the hearing and consented to interdicts in favour of Disney and the other studios restraining it (and its franchisees) from, inter alia, hiring out the relevant Zone 1 DVDs.  However, Mr Video persisted in aspects of its defence: disputing that Nu Metro had locus standi (as exclusive licensee); that the studios’ had any right to an order for the delivery-up of the Zone 1 DVDs; and that costs on the punitive attorney-and-client scale should be awarded.

Mr Video denied that Nu Metro had proven that it was an exclusive licensee of the studios and also argued that the various agreements between Nu Metro and the studios only granted it rights in respect of Zone 2 encoded DVDs (i.e. those for South Africa).  Thus, went the argument, it had no locus standi to approach the Court in relation to Zone 1 DVDs.  The Court held this argument to be one of form rather than substance as it failed to take into account the nature of the rights involved, namely, the copyright in the cinematographic films themselves and not in their specific formats.  The Court found that Nu Metro had proved, on a preponderance of probabilities, that it had the required locus standi.

The Court also held that the studios were entitled to the delivery-up of all the infringing copies of the Zone 1 DVDs in terms of Section 24(1) of the Copyright Act. It reasoned that, had the American manufacturers of the Zone 1 DVDs made them in South Africa, they would have been acting outside the scope of their licences and in breach of Nu Metro’s exclusive licence. Thus, the Zone 1 DVDs were all “infringing copies” liable to be delivered-up.

On the issue of costs, the Court awarded the Applicants punitive attorney-and-client costs.  Mr Video had received unequivocal legal advice in 2006 that the practice of parallel importing films into South Africa was unlawful but, despite knowing that it had no valid defence, it had decided to continue its unlawful conduct and oppose the injunction application.  Mr Video’s conduct and its attempts to delay the inevitable consequences of its acts were held to be an abuse of the process of Court and it was duly penalised.

Adams & Adams represented Disney in the case.

Subsequently, Mr Video applied for and has been granted leave to appeal to the Supreme Court of Appeal (SCA) against the above decision. The interdicts previously granted against Mr Video in favour of Disney and the other studios remain in place, however.

Simultaneously, with the application for leave to appeal, Nu Metro applied in terms of Rule 49(11) to have part of the court a quo’s order in its favour put into operation immediately pending the final determination of the appeal. The court granted this application as well.

As a result, pending the appeal, the court a quo’s order interdicting and restraining Mr Video from infringing Nu Metro’s rights as exclusive licensee, and ordering the delivery up of the infringing copies of Zone 1 DVDs (to held for safekeeping by Nu Metro’s attorneys), has been re-instated.

It is unlikely that the appeal will be heard by the SCA before the latter part of 2009.

Chris Job
Chairman
chris@adamsadams.co.za

Mandy Gordon
Senior Associate
mandy-g@adamsadams.co.za