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Legal Update

Hong Kong's Highest Court Upholds Conviction On BitTorrent Seeder

25 May 2007
Mayer Brown JSM Legal Update

Summary

In HKSAR v. Chan Nai Ming (FACV No.3 of 2007), the Hong Kong Court of Final Appeal affirms the conviction (the world's first ever) on the culprit for distributing infringing copies of three copyright films over the Internet by way of the BitTorrent ("BT") technology. In delivering its verdict, the highest court of Hong Kong closely examines the traditional legal concepts of "copies" and "distribution" in the context of BT technology, one of the most popular and innovative "peer-to-peer" information-sharing systems of this age.

Full Update

Background

The Defendant, nicknamed "Big Crook", was convicted of attempting to commit an offence under Section 118(f) of the Copyright Ordinance which reads

"(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."

According to the prosecution's evidence, Big Crook was found posting a message on an online forum together with a ".torrent" file to enable others to download 3 Hollywood films. For each of those 3 films, Big Crook purchased legitimate VCD copies but then made infringing copies which were stored on his computer's hard disk and subsequently converted into ".torrent" files.

Big Crook was convicted and sentenced to 3 months' imprisonment at the magistrate's level and the conviction and sentence were upheld by the Court of First Instance. Big Crook obtained leave to bring this case before the Court of Final Appeal ("CFA").

Issues Before The CFA

The CFA was asked to decide on two issues:

1. What constitutes a "copy" capable of distribution under Section 118(f)?

2. Whether Big Crook's conduct amounts to "distribution"

1. Meaning of "copy"

Section 23(2) of the Copyright Ordinance provides that "copying of a work means reproducing the work in any material form" and this includes storing the work in any medium by electronic means. Focusing on the meaning of the words "in any material form", Big Crook argued that a digital or electronic reproduction of a copyright work can only constitute a "copy" if it is contained or stored in some "tangible physical object", e.g. a hard disk, and cannot exist in a vacuum. Big Crook further argued that "distribution of copies" can only happen where there is a physical transfer of material objects.

Whilst branding this argument as "ingenious", the CFA rejected Big Crook's interpretation. The CFA cited two examples to support the proposition that electronic copies can be transmitted without any transfer of physical objects: (i) the distribution of an electronic copy of a book by way of email attachments; (ii) the purchase of an online copy of software. The CFA concluded that distribution of electronic copies is not confined to the physical transfer of storage devices. An Internet network consisting of linked computers is a no less tangible medium.

The CFA also snubbed Big Crook's argument that uploading a file to the Internet is simply sending out a series of electronic instructions (not copies of the copyright work) which cause copies to be created in the memories of other computers. On the facts, the CFA noted that although the initial infringing copies of the films physically remained on Big Crook's computer hard disk, the ".torrent" files, broken up into small packets of digital information, were actually reproduced on his computer (thus creating another copy of the films) before being sent down to the downloading network. The aggregate of the small packets created and transmitted by Big Crook constitutes an electronic copy of the copyright work.

2. What amounts to "distribution"?

In the lower courts, Big Crook raised a defence that his conduct was purely passive in the sense that copies were only made and obtained by the actions of the downloaders. The CFA construed the word "distribution" widely as being capable of encompassing a process in which a person first takes necessary steps to make the item available and the recipient then takes his own steps to obtain the item. The CFA further decided that Big Crook's conduct was far from "passive". On the contrary, Big Crook was found to have taken numerous preparatory steps (e.g. installation of the BT software, creation of the ".torrent" files, publicising on the online forum) and have kept his computer connected with the network to ensure the complete transfer of the entire copies of the films to the downloaders.

Big Crook raised a further defence that to constitute a distribution of a copy, the distributor must first have possession of the copy which is transferred, after which the transferred copy will leave his possession. In the present case, the infringing copies of the films at all times remained on his computer's hard disk.

The CFA rejected this defence on evidence. It was found that electronic copies duplicating the initial infringing copies were generated by Big Crook's computer before being sent to the downloaders as a stream of digital packets. The CFA however left open the question whether distribution must necessitate the transfer of a copy which was first in the distributor's possession. If there is a peer-to-peer sharing technology which however does not involve the duplication of the initial infringing copies on the seeder's computer, whether the uploading act will still constitute a distribution of the infringing copies is left to be decided.

Implications

Whilst the CFA decision has been welcomed by the prosecution and the law-enforcing bodies, it is questionable in a number of respects.

During the course of argument, Big Crook accepted that his acts amounted to "the making available of copies of the work to the public" which constitutes copyright infringement under Section 26 of the Copyright Ordinance. Such a form of copyright infringement, which expressly includes the making available of copies of a work to the public via the Internet, attracts only civil liability but not criminal sanction. It is submitted that Big Crook's acts fall squarely with Section 26 rather than Section 118(f) which, given its criminal consequences, is more confined in scope.

Following the CFA's interpretation of the distribution offence which is now the law, it is hard to distinguish between the acts of "making available of copies to the public" and "distribution of copies". Potentially, all peer-to-peer sharing system users (not merely the seeder) will now be deemed to be "distributing" electronic copies and might be caught by this offence.

Another question is whether the "digital packets" constitute a substantial part of the copyright work which is a pre-requisite for copyright infringement. In a BT system, all connected users share the distribution of the files and the more users are involved, the fewer files a computer will be required to "distribute". The CFA has not expressed its views on this.

For further information, please contact:

Name:
Position: Partner
Phone: +852 2843 4414
Fax: +852 2103 5055

Name:
Position: Associate
Phone: +852 2843 4572
Fax: +852 2103 5416

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