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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Nintendo Company Ltd & Anor v Playables Ltd & Anor [2010] EWHC 1932 (Ch) (28 July 2010) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2010/1932.html Cite as: [2011] Bus LR D89, [2010] FSR 36, [2010] EWHC 1932 (Ch), [2010] ECDR 14

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/07/2010

Mr Justice Floyd:

Introduction

1. This is an application for summary judgment in an action concerned with copyright infringement and the avoidance of copy-protection devices. The first claimant is the designer, manufacturer and distributor of the Nintendo DS games console, and the games that go with it. The second claimant acts as the European distributor of the games. The first defendant is a company under the control of the second defendant.
2. This case concerns a number of different types of device imported and dealt in by the Defendants (the accused devices) which enable Nintendo DS users to play unlawful copies of Nintendo DS games which they have downloaded using the Internet. Nintendo refer to these devices as "game copiers". The defendants have imported the accused devices on a very large scale. HMRC and Trading Standards have seized more than 165,000 game copiers intended for the defendants. The economic effect on Nintendo of the trade in these devices is substantial as each accused device can store and play copies of many Nintendo DS games. Genuine Nintendo DS games may retail for £20 to £30 on release.
3. This application for summary judgment comes before the court in somewhat unusual circumstances, as Nintendo have achieved a partial settlement of their claim with the defendants. The settlement involves the defendants giving contractual undertakings in relation to dealing in the accused devices. However the settlement agreement also expressly contemplates that Nintendo may proceed with the litigation to obtain such relief as it is entitled to, subject to certain protections built into the settlement agreement. I was initially concerned that this unusual situation was a device to use the court's procedure for a collateral purpose, namely to achieve a judgment which was not necessary to resolve the dispute between the parties. I was however satisfied by Mr Martin Howe QC who appeared for Nintendo with Mr Jonathan Hill, that there was nothing improper about the way in which Nintendo was seeking to proceed. The settlement plainly does not dispose of the action, and Nintendo have valid reasons for wishing to obtain a judgment establishing their rights in these circumstances. These circumstances have, however, led me to scrutinise the application with particular care given that the defendants no longer resist the application, but do not consent to it.
4. I should only give summary judgment on the application if the defence has no realistic prospect of success and there is no other reason for a trial.
5. In the Particulars of Claim, Nintendo asserts claims under the circumvention of copy-protection provisions, namely section 296ZD and section 296 of the Copyright Designs and Patents Act 1988 ("the Act"). In addition they assert "normal" copyright infringement (by authorisation) in respect of some copyright works transiently copied into the random access memory in the course of use of the defendants' devices. Claims for infringement of Community trade marks which are made in the Particulars of Claim are accepted to be unsuitable for summary judgement, and were not pursued on this application.
6. Nintendo has implemented a range of security measures designed to prevent the loading and playing of unlawful copies of its games. In the Particulars of Claim at paragraph 21, Nintendo relies principally on the following measures:

i) the shape of the connector arrangement of the slot on the Nintendo DS and the corresponding shape of the game cards designed to fit into it;

ii) the boot-up software permanently stored on the Nintendo DS which checks for the presence on an inserted card of the Nintendo Logo Data File ('NLDF') and prevents execution of programs present on the inserted card if the NLDF is not detected

iii) the use of shared key encryption technology and scrambling to enable the Nintendo DS to detect whether game cards are authentic.

7. Although the defendants dispute the description "game copiers" it is common ground that the first defendant has offered for sale devices designated as follows:

i) R4 DS;

ii) M3 DS;

iii) DS One Supercard;

iv) DSTT;

v) DS Linker;

vi) Acekard;

vii) CycloDS Evolution;

viii) N5;

ix) EZ.

8. All the accused devices fit into one of the slots on the Nintendo DS. They each contain either built-in memory or a further slot of their own which accommodates a micro-SD flash card, a commercially available memory card. Copies of games can be stored on this memory either by connecting the device itself to a computer using an adapter or by extracting the memory card used with it and connecting that to a computer, again using an appropriate adapter.
9. The accused devices also contain circuitry, software and data (including a copy of the NLDF) which enable them to pass the tests performed by the Nintendo DS to verify that the game card inserted is genuine. In this way, the accused devices enable unlawful copies of Nintendo games to be played successfully on the Nintendo DS, as well as other material. The evidence establishes that when a game is played, substantial parts of the game code are loaded into the RAM of the Nintendo DS console.

Nintendo's case under section 296ZD

10. I start with the claim under section 296ZD. For reasons connected with the history of the relevant European legislation, that section is only concerned with protection applied to copyright works other than computer programs. Subsections (1) and (2) of that section provide as follows:

"(1) This section applies where –

(a) effective technological measures have been applied to a copyright work other than a computer program; and

(b) a person (C) manufactures, imports, distributes, sells or lets for hire, offers or exposes for sale or hire, advertises for sale or hire, or has in his possession for commercial purposes any device, product or component, or provides services which –

(i) are promoted, advertised or marketed for the purpose of the circumvention of, or

(ii) have only a limited commercially significant purpose or use other than to circumvent, or

(iii) are primarily designed, produced, adapted or performed for the purpose of enabling or facilitating the circumvention of,

those measures.

(2) The following persons have the same rights against C as a copyright owner has in respect of an infringement of copyright -

(a) a person –

(i) issuing to the public copies of, or

(ii) communicating to the public,

the work to which effective technological measures have been applied;

(b) the copyright owner or his exclusive licensee, if he is not the person specified in paragraph (a); and

(c) the owner or exclusive licensee of any intellectual property right in the effective technological measures applied to the work."

11. The group of sections in which s.296ZD is to be found has its own interpretation section, section 296ZF. That section provides:

"(1) In sections 296ZA to 296ZE, "technological measures" are any technology, device or component which is designed, in the normal course of its operation, to protect a copyright work other than a computer program.

(2) Such measures are "effective" if the use of the work is controlled by the copyright owner through –

(a) an access control or protection process such as encryption, scrambling or other transformation of the work, or

(b) a copy control mechanism, which achieves the intended protection.

(3) In this section, the reference to –

(a) protection of a work is to the prevention or restriction of acts that are not authorised by the copyright owner of that work and are restricted by copyright; and

(b) use of a work does not extend to any use of the work that is outside the scope of the acts restricted by copyright.

(4) Expressions used in sections 296ZA to 296ZE which are defined for the purposes of Part 1 of this Act (copyright) have the same meaning as in that Part."

12. Mr Howe submits, and I accept, that a claimant relying upon the rights afforded by s.296ZD needs to show the following things:

(a) In relation to ETM:

(i) that there are "technological measures";

(ii) that they have been "applied" to a copyright work or works (other than a computer program); and

(iii) that they are "effective".

(b) that the defendant has manufactured, imported, distributed, sold etc, a "device, product or component" or provided services which:

(i) are promoted, advertised or marketed for the purpose of the circumvention of the ETM;

(ii) have only a limited commercially significant purpose or use other than to circumvent the ETM; or

(iii) are primarily designed, produced, adapted or performed for the purpose of enabling or facilitating the circumvention of the ETM.

13. In addition, the claimant must establish that it has standing to bring the claim because:

i) it is a person issuing to the public copies of, or communicating to the public, the work to which the ETM have been applied, or, if not such person, it is the owner of the copyright in that work, or his exclusive licensee; and/or

ii) it owns or holds an exclusive licence to any intellectual property right in the ETM applied to the work.

14. Section 296ZF does not exactly follow the wording of the Directive which it was designed to implement, namely Directive 2001/29/EC: the Copyright in the Information Society Directive. The second sentence of Article 6.3 of the Directive makes it clear that section 296ZF(2) is not intended to be an exhaustive definition of what amount to "effective" technological measures:

"Technological measures shall be deemed 'effective' where the use of a protected work or other subject-matter is controlled by the rightholders through application of an access control or protection process, such as encryption, scrambling or other transformation of the work or other subject-matter or a copy control mechanism, which achieves the protection objective."

15. What is clear therefore is that encryption and scrambling measures are expressly contemplated.
16. In R v Higgs [2009] 1 WLR 73, the Court of Appeal held that ETM did not include measures which merely provided general discouragement of copying, when considering the corresponding criminal section, 296ZB. In that case it was sought to mount an argument that the existence of copy protection at the stage at which the game was played amounted to a discouragement to making copies of the game at an earlier stage. This elaboration was necessary because in that case the prosecution had failed to put their case on the basis of the copying which took place at the later stage, when a transient copy of the game is copied into the RAM of the Nintendo DS. Jacob LJ said at [35]:

"Is it enough if the technological measure is a discouragement or general commercial hindrance to copyright infringement or must it be a measure which physically prevents it? To our minds the position is clear -- it is the latter. Neither the Directive nor the Act would have been drafted in the way that they are if such a general form of hindrance was enough."

17. Of course, the ETM do not have to be totally effective: otherwise there would be no scope for the operation of the section in relation to circumvention. The purpose of the restriction interposed by the measure must be to present a physical barrier to copying at the relevant stage.
18. In Sony v Ball [2004] EWHC 1738 at [43] Laddie J held that the ETM could equally be applied in hardware or software or both. The reference to scrambling and encryption was a pointer in this direction, as such techniques are frequently implemented using both hardware and software.
19. In that case Laddie J, at [39] – [40] also pointed out that the section creates a tort of strict liability. It is no defence to show that the defendant did not know and had no reason to believe that the devices would be used to make infringing copies. I agree with what Laddie J said at [40]:

"Once a protected technological measure exists, it is a breach of the provisions, for example, to advertise for sale any device, product, component or service which is primarily designed, produced, adapted or performed for the purpose of enabling or facilitating the circumvention of the technological measure."

20. Paragraph 18 of the Defence raises three positive defences in relation to this section:

i) the defendants did not know or have reason to believe that the accused devices would be used to make infringing copies;

ii) there are lawful uses for the accused devices; and

iii) no legitimate reliance can be placed in relation to the actions of HMRC or Trading Standards in seizing the goods.

21. In my judgement, none of these defences has a realistic prospect of success:

i) As I have already indicated, it is not a requirement in proceedings brought under section 296ZD to show knowledge or reason to believe that the accused devices would be used to make infringing copies. The section creates a tort of strict liability. There is a partial defence to damages and other financial relief afforded by subsection (7), but that is based on the defendant showing that he did not know or have reason to believe that his acts enabled or facilitated an infringement of copyright. I do not understand the reference in the defence to be to that subsection, which in any event would be a difficult defence to establish in respect of a device which clearly has the facility to reproduce copyright material.

ii) Because of the way in which the device is constructed, the lawful uses must be uses of the accused devices in conjunction with the DS console. One such suggested lawful use is for home-made games. However, such use will still circumvent the ETM, or otherwise the game will not play. The mere fact that the device can be used for a non-infringing purpose is not a defence, provided one of the conditions in section 296ZD(1)(b) (considered below) is satisfied.

iii) Mr Howe does not rely for the purposes of this application on anything to be inferred from these matters.

22. I should nevertheless consider whether Nintendo has established its case on the elements of section 296ZD to such an irrefutable standard that I should grant summary judgment.
23. The first question is whether the Nintendo DS system has ETM. I have to say that I nurture some doubts about whether the physical shape and electrical characteristics of the connector amount to ETM. It is true that in order to copy a work onto the console one needs to make a device capable of being so connected. But it seems to me to be at least arguable that the section has in mind something which acts as a barrier to copying once such a connection has been made. In addition, the question raised seems to me to be one of fact and degree which were it the only basis on which the system could be said to have ETM, would have to go to trial.
24. On the other hand, the evidence filed on the application shows that the boot-up software, the NLDF and the encryption and scrambling clearly amount to ETM. The game card contains header data which, if not present and correct, will prevent the game being fully copied across into the console. The NLDF is one such item of data. Moreover, the card includes key data to allow the console and card to communicate in encrypted and scrambled form. Whilst one purpose of this is to prevent leakage of the data when communication is occurring, the encryption and scrambling in fact have the effect of preventing communication if the key data is not present on the card. These arrangements seem to me to amount quite clearly, particularly given the express reference to these matters in section 296ZF(2)(a), to ETM.
25. It is equally plain that such ETM have been "applied" by Nintendo to its games. Are they applied to copyright works "other than computer programs"? It seems to me, again, that the answer is yes. Although that which is stored on the card is a computer program, the game includes graphic and other works the copying and use of which is controlled by the ETM.
26. It is common ground that the accused devices have been imported and offered by the defendants. It is clear from the evidence that all the accused devices allow the Nintendo DS to boot up and play games by successfully circumventing the ETM. It follows that the devices meet the conditions specified in each of subsections (i) to (iii) of section 296ZF(1)(b).
27. Finally it is clear that both claimants have the relevant standing to sue.
28. There is no realistic answer to any of this, or any other reason for a trial. Accordingly Nintendo is entitled to summary judgment on its claim under section 296ZD.

Nintendo's case under section 296

29. I turn therefore to Nintendo's case under section 296. That section, as it appears in the Act is as follows:

"(1) This section applies where –

(a) a technical device has been applied to a computer program; and

(b) a person (A) knowing or having reason to believe that it will be used to make infringing copies -

(i) manufactures for sale or hire, imports, distributes, sells or lets for hire, offers or exposes for sale or hire, advertises for sale or hire or has in his possession for commercial purposes any means the sole intended purpose of which is to facilitate the unauthorised removal or circumvention of the technical device; or

(ii) publishes information intended to enable or assist persons to remove or circumvent the technical device.

(2) The following persons have the same rights against A as a copyright owner has in respect of an infringement of copyright –

(a) a person –

(i) issuing to the public copies of, or

(ii) communicating to the public,

the computer program to which the technical device has been applied;

(b) the copyright owner or his exclusive licensee, if he is not the person specified in paragraph (a);

(c) the owner or exclusive licensee of any intellectual property right in the technical device applied to the computer program…

(6) In this section references to a technical device in relation to a computer program are to any device intended to prevent or restrict acts that are not authorised by the copyright owner of that computer program and are restricted by copyright.

(8) Expressions used in this section which are defined for the purposes of Part 1 of this Act (copyright) have the same meaning as in that Part."

30. Section 296 was introduced into the Act by way of amendment to the previous section in order to implement Article 7(1)(c) of Directive 91/250/EEC (the Computer Programs Directive). That section provides:

"1. Without prejudice to the provisions of Articles 4, 5 and 6, Member States shall provide, in accordance with their national legislation, appropriate remedies against a person committing any of the acts listed in subparagraphs (a), (b) and (c) below:

(a) any act of putting into circulation a copy of a computer program knowing, or having reason to believe, that it is an infringing copy;

(b) the possession, for commercial purposes, of a copy of a computer program knowing, or having reason to believe, that it is an infringing copy;

(c) any act of putting into circulation, or the possession for commercial purposes of, any means the sole intended purpose of which is to facilitate the unauthorized removal or circumvention of any technical device which may have been applied to protect a computer program.

31. There is no requirement in Article 7 of the Directive to show that the defendant in the case of Article 7(1)(c) must do the act "knowing or having reason to believe that it will be used to make infringing copies" as is required under section 296(1)(b). Fixing on the difference in language between sub-paragraphs (a) and (b) on the one hand and (c) on the other, Mr Howe suggests that there is a serious question as to whether section 296 correctly implements the Directive. There is no requirement for knowledge in sub-paragraph (c) of Article 7(1), in stark distinction to the requirement in sub-paragraphs (a) and (b). However, in the light of the nature of this application and the absence of argument from any defendant, I shall proceed on the basis of the language of the statute rather than the Directive, which, after all, only directs member states to provide "appropriate" remedies.
32. Mr Howe submits, and I accept, that a claimant under s.296 needs to show the following things:

(a) that there is a "technical device" which has been applied to a computer program;

(b) that the defendant:

(i) has manufactured, imported, distributed, sold etc, means the sole intended purpose of which is to facilitate the unauthorised removal or circumvention of the technical device;

(ii) knows or has reason to believe that that means will be used to make infringing copies of the computer program.

(c) that the claimant has standing to bring their claims because:

(i) it is a person issuing to the public copies of, or communicating to the public, the computer program to which the technical device has been applied, or, if not such person, it is the owner of the copyright in the computer program, or his exclusive licensee; and/or

(ii) it owns or holds an exclusive license to any intellectual property right in the technical device applied to the computer program.

33. Although section 296 uses the expression "technical device" instead of ETM, it is clear that the definition- "any device intended to prevent or restrict acts that are not authorised by the copyright owner of that computer program and are restricted by copyright" - is a wide one.
34. The section restricts acts in relation to "means the sole intended purpose of which is to facilitate the unauthorised removal or circumvention of the technical device". It needs to be kept in mind that the focus of this requirement is on circumvention. The fact that a device may be used for a purpose which does not involve infringement of copyright does not mean that the sole intended purpose is not the unauthorised circumvention of a technical device.
35. The additional requirement for knowledge which the draftsman has added to the language of the Directive – "knowing or having reason to believe that it will be used to make infringing copies" - is general. It is not necessary to show (a) that the defendant knew any particular program was to be copied or (b) that the means would only be used for making infringing copies.
36. The defendants put forward the same three specific defences as they do in relation to section 296ZD. Whilst the alleged absence of knowledge is a relevant defence under this section, for reasons which appear below I do not consider that any of the defences has a realistic prospect of success in this case.
37. It is clear that "technical devices" have been applied to the copyright computer programs in the Nintendo DS and its game cards. It is clear also that the defendants' products, or perhaps more strictly the relevant elements of those products, have the sole intended purpose of circumventing those technical devices.
38. In relation to the knowledge requirement, Nintendo relies on the evidence of Mr Yarnton, the General Manager of Nintendo's UK subsidiary. His evidence demonstrates, to put it at its lowest, that a very well known use of devices such as the R4 card is for video game piracy. This fact has had wide publicity in a number of articles which he produces. In addition Nintendo relies on the evidence of Mr Boyd of the second claimant who refers to the very large volumes of devices in which the defendants were dealing. Given the relatively minor proportion of the market represented by lawful use he concludes that it is inconceivable that the defendants did not appreciate that the major use to which the devices would be put would involve infringement of copyright. In the light of that evidence, I do not think that the defendants have a realistic prospect of asserting that they did not know of the unlawful uses to which the devices would be put.
39. The other requirements of the section being made out, and there being no other reason for a trial, Nintendo has established that it is entitled to summary judgment on section 296 as well.

The jurisdiction point

40. Some of the defendants' sales of the accused devices were export sales. The devices would therefore only be put to use in the country to which they were exported. In Sony v Ball Laddie J concluded, both in relation to section 296 and section 296ZD that the rights afforded by these sections were not infringed when the "circumvention" took place abroad. His reasoning was based principally, as it seems to me, on the fact that in section 296 there is a requirement that the person dealing in the device knows or has reason to believe that it will be used to make infringing copies. "Infringing copies" means, by virtue of the definitions in the Act, articles the making of which would involve an act of infringement of United Kingdom copyright. Mr Howe sought to persuade me to take a special and broader view of "infringing copies" when construing section 296, but I am not persuaded that it is right to do so. It seems to me therefore that I must refuse summary judgment in respect of the export sales under section 296.
41. Laddie J also held that the same applied in relation to section 296ZD. The foundation for coming to that conclusion appears to me, with respect, to be more problematic. The section has, as I have already pointed out, nothing to correspond to the knowledge requirement of section 296. There is therefore no basis for bringing in the definition of infringing copy and, with that, importing a requirement for circumvention in the United Kingdom. The relevant requirements concerning circumvention under this section are all concerned with the capabilities of the device, or the purpose for which the device is sold. For example, if one takes the requirement of section 296ZD(1)(b)(ii) that the device has only a limited commercial purpose other than to circumvent, that is a requirement which one can assess at the moment the device is distributed. There is no requirement that circumvention should actually occur. If that is right, then there is equally no requirement that the circumvention should take place in the United Kingdom.
42. I should only depart from Sony v Ball if I am quite satisfied that it is wrong on this point, particularly as so distinguished a judge in the field of intellectual property decided that case. I am so satisfied. Laddie J does not comment on the absence of the relevant words in section 296ZD, or provide any other basis for holding that the contemplated circumvention must occur in the United Kingdom. Whilst a statute would not normally be construed so as to have extra-territorial effect, I do not understand the section as I construe it to be having such an effect. The section is concerned with dealings in the United Kingdom in devices capable of circumvention, wherever they may ultimately end up. It follows that I consider that Nintendo is entitled to summary judgment on export sales under this section.

"Ordinary copyright"

43. Nintendo alleges that it owns the copyright in the following works identified in the Particulars of Claim:

(a) the source code for the Nintendo DS boot up software, as an original computer program (i.e. literary work);

(b) the NLDF, as either an original literary work or an original artistic work;

(c) the Nintendo Racetrack Logo, as an original artistic work.

44. Although these allegations are formally in issue, the evidence filed on this application in relation to (a) and (b) makes it plain that copyright subsists in these works and is owned by Nintendo. The copyright work in issue under (c) is, however, so rudimentary that I consider that it is arguable that copyright does not subsist, particularly as what it is relied on is a modification of a pre-existing work. It follows that summary judgment does not extend to this work.
45. Nintendo contends that the copyright in the source code for the boot up software is infringed because when a user inserts the accused device into the console a copy of the boot up software is copied into RAM. Nintendo does not authorise the making of this copy.
46. Infringement is alleged on the basis of authorisation of infringement and on the basis of section 24 of the Act which relates to distributing in the course of a business articles which were specifically designed or adapted for making copies of the source code, and which it had reason to believe would be used to make infringing copies.
47. I was not entirely persuaded that there may not be an answer to this allegation based on the scope of Nintendo's authority to insert matching cards into the slot. It would accordingly not be right to grant summary judgment on this aspect of the claim.
48. By contrast each game card has the code relevant to the NLDF installed on it. I cannot see how it can be said that Nintendo authorised the copying of this into RAM. So here I think there is no answer to the case that there is authorisation of infringement as well as liability under section 24. The accused devices are much more than the reel-to-reel tape recorders in CBS v Amstrad [1988] AC 1013. They are templates for infringement. The knowledge requirement is plainly met as well.

Liability of the second defendant

49. Nintendo contends that Mr Chan is liable jointly with Playables. It relies on the fact that Mr Chan is the sole director and shareholder in Playables and the fact that the scale of Playables' activities is such that they can only have been carried out as a matter of Playables' corporate policy. That policy, given Mr Chan's position, must have been set by Mr Chan. Nintendo also relies on the fact that many of the consignments of Accused Devices were delivered to Playables marked for Mr Chan's personal attention.
50. In my judgment these matters, which are not the subject of any positive defence, are sufficient to establish Mr Chan's liability as a joint tortfeasor to the summary judgment standard.
51. In the light of the above the draft order handed to me in the course of the hearing requires amendment, but it follows that I am prepared to grant summary judgment to the extent identified above.