On 24 October 2005, a Hong Kong Magistrates' Court convicted Hong Kong resident Chan Nai-Ming ("the Defendant") for distributing 3 movie files over the Internet using the popular BitTorrent ("BT") P2P file-sharing tool ("the BT Case"). This is the first time criminal charges were successfully brought against a file sharer leading to a jail sentence. Mr. Chan was sentenced to 3 months imprisonment, which is likely to have a strong deterrent effect on other file sharers in Hong Kong.
Before the Magistrate’s ruling, there had been much debate in Hong Kong as to whether the Defendant's file sharing activities fell within the scope of Section 118 of the Copyright Ordinance. The ruling clarifies that certain aspects of file sharing attract criminal liability under the Hong Kong Copyright Ordinance, but a number of issues remain to be clarified.
On 10 January and 11 January 2005, an officer of the P2P Task Force of the Hong Kong Customs and Excise Department ("Hong Kong Customs") noticed that the Defendant had publicized three .torrent files on a BitTorrent newsgroup site. The files enabled third parties to download three films which the Defendant had copied from genuine VCDs and seeded on his own computer. The Hong Kong Customs officer downloaded and activated the .torrent files and found that the seeder's IP address was that of the defendant's computer. The Customs officer proceeded to download the film and soon there were forty other downloaders. The connection broke down when the Customs officer and two other downloaders completed downloading the film.
On 12 January 2005, Hong Kong Customs obtained a search warrant and raided the Defendant’s home. The Defendant was arrested and his computer was seized. At the time of his arrest, the Defendant was operating his computer. The Defendant did admit that he was the Internet account holder responsible for uploading the .torrent files onto the BT newsgroup. Interestingly, the Defendant used the Internet account in question under the pseudonym "Big Crook".
Initially, three charges (one charge per film) were brought against the Defendant under S118(1)(f) of the Copyright Ordinance (Cap 528) ("the Copyright Ordinance") for attempting to distribute an infringing copy of a copyright work to such an extent as to affect prejudicially the rights of the copyright owner. The penalty for this criminal offence carries a maximum fine of HK$50,000 for each infringing copy and a maximum prison sentence of 4 years.
The case caused a lot of debate in Hong Kong with one camp claiming that the act of uploading the seeder .torrent files to the BT newsgroup only amounted to making available the .torrent files for download by third parties and the other claiming that the uploading amounted to distribution of the files. The difference between the two diverging views is that the act of "making available" copyright works without permission attracts civil liability while the act of distributing unauthorized copies of a copyright work attracts criminal liability under the Hong Kong copyright law.
Given this uncertainty, three alternative charges (one charge per film) of obtaining access to a computer with a view to dishonest gain for himself or another under Section 161(1)(c) of the Crimes Ordinance (Cap 200) ("Crimes Ordinance") were subsequently laid against the Defendant, in case the charges under the Copyright Ordinance were not successful.
The Defendant's case was that even if his involvement with the .torrent files was proved as alleged, his acts did not amount to distribution under Section 118(11)(f) of the Copyright Ordinance. The Defendant's lawyers argued that the role of the Defendant was passive in that he did not actively distribute the films but did nothing more than share or make available the films to Internet users who wanted to download them. The significance of this distinction as noted above is that the act of making available to the public does not attract criminal liability but only civil liability under the Copyright Ordinance.
The Magistrate took a different view and considered that as a whole, the Defendant's acts were essential and continued throughout the downloading process and therefore they were an integral part of the enterprise of downloading the films to other computers. The Defendant's acts included:-
- loading films onto his computer
- creating the .torrent files
- creating the images of the inlay cards and imprinting them with his logo
- publishing the existence of the .torrent files and the names of the movies on the newsgroup so that others would know where to go to download them
- activating the .torrent files
- keeping his computer connected to enable downloading by others
Downloading from the seeder would not be possible if the seeder computer ie the Defendant's computer had been turned off or if the BT software was closed or otherwise blocked. Given that the Defendant kept his computer connected to the Internet and did not close the BT software the Court held that his acts were more than merely preparatory to distribution. They were at the very least an attempt to distribute.
Distinction between distributing and making available
A similar discussion of the term "to distribute" took place in the Canadian Federal Court case BMG Canada Inc. and others v Doe & Ors. A different interpretation of the term was offered in the Canadian case. The Canadian federal judge considered that the placing of personal copies of music files into shared directories which are accessible by other computer users did not amount to an act of distribution. The judge commented that there must be a "positive act by the owner of the shared directory" for there to be distribution. The judge distinguished the act of placing and making available copies which are passive acts from positive acts of sending copies to others or advertising the material’s availability for the purpose of illegal copying.
The case was appealed and the Canadian Federal Court of Appeal judge queried whether the Federal Court judge had erred in his interpretation because it was not clear to him that distribution under the Canadian Copyright Act required a "positive act" and there was no authority cited in support of the view of the lower court judge.
In the BT Case, the Magistrate viewed the Defendant’s acts as not merely preparatory but as positive acts, especially when coupled with his intention, and as amounting to distribution of illegal copies of films. The Defendant was therefore not merely making available to public the .torrent files.
In Hong Kong at least, it would appear that the test which the court may likely adopt in future cases is to look at the active and passive elements in each particular act as a whole in order to determine whether such acts would amount to distribution or not. In the present case, the Defendant did not initiate the transfer of the films from his computer but he did copy them from genuine VCDs, seeded them on his computer and then actively publicized the existence of the .torrent files containing the films on Internet newsgroups. In the words of the Court, he invited the public to come and get illegal copies of the films.
The Magistrate also had to consider whether the Defendant distributed to such an extent as to affect prejudicially the interests of the copyright owners. The Magistrate made it clear that the measure of prejudice is not necessarily restricted to economic prejudice measured by loss of sales. Other factors to be considered should include non-economic prejudice caused by the mere existence of the films on the Internet which significantly undermined the business of copyright owners and the impact on their rental market.
Although the evidence before the court was of one whole film completely downloaded by the Customs officer from the Defendant’s seeder computer which barely amounted to significant prejudice, the Magistrate inferred from the Defendant's acts that his intention must have been to distribute much more widely than simply to one downloader. Thirty to forty downloaders had joined the Customs Officer by the time he finished downloading the films and the distribution to thirty to forty downloaders would certainly cause prejudice to copyright owners through unauthorized distribution and lost sales. The Magistrate therefore concluded that the Defendant's acts amounted to an attempt to distribute to such an extent as to affect prejudicially the rights of the copyright owners.
The Magistrate gave his Sentence on 7 November 2005.
In attempting to pass an appropriate penalty against the Defendant, the Magistrate referred to an earlier Hong Kong Court of Appeal case where a firm and deterrent based sentencing policy had been adopted for violations of intellectual property rights. The Magistrate emphasized that custodial sentences rather than suspended sentences are appropriate for copyright violations unless there are truly exceptional circumstances present.
In cases involving trading in the counterfeit CDs and DVDs for commercial gain, the general starting point for assessing penalty is a prison sentence of 6 to 12 months. The exact sentence will, of course, depend on the scale and circumstances of each offence.
In the BT case, the Magistrate first distinguished cases involving dealings in infringing CDs or DVDs for commercial gain from the present case where the Defendant did not make any commercial gain. The Magistrate concluded that the legislation did not make a distinction between offences based on whether or not a commercial gain had been made. The absence of commercial gain is of limited significance in assessing the seriousness of the offence and the appropriate penalty for the offence.
The Defendant was sentenced to 3 months imprisonment (which will be served concurrently) for each of the three charges brought under Section 118(1)(f) of the Copyright Ordinance. Since the charges under the Copyright Ordinance were successful, the Magistrate made no ruling on the three alternative charges under the Crimes Ordinance.
Given that the Defendant had no prior conviction record, the Magistrate took into account a number of factors in handing down the sentence which included the fact that:-
i) the Defendant was fully aware of the illegality of seeding copyright material using BT file sharing tools
ii) there is only a minor distinction between a manufacturer or a distributor of infringing discs and a BT seeder
iii) the potential damage to the film industry is huge
iv) there is no difference in terms of harm to copyright owners between file sharing and distribution of infringing discs
A prison sentence for an infringer who did not profit from his acts of copyright infringement may seem harsh. However, given the widespread use of file sharing tools by Internet users and the damage they appear to have done to copyright owners, the Magistrate found the need to send a strong deterrent message to all file sharers in order to demonstrate that copyright laws do work in Hong Kong to protect and safeguard the interests of copyright owners. The opening remarks in his Sentence have made this clear: "I must say this first of all: that Hong Kong carefully guards intellectually property rights. These rights are not illusory, they are not something which exists only in theory and not in practice. They are real, they are valuable and they amount to genuine property. And the owners of those rights are entitled to the same level of protection from dishonest appropriation as the owners of ordinary, more tangible property".
Alternative charges under the Crimes Ordinance
Although the charges under the Crimes Ordinance did not need to be considered, obiter dicta in the judgment suggest that the Magistrate was of the view that the Defendant's acts of publishing .torrent files on the newsgroup computer would also be caught under Section 161(1)(c) of the Crimes Ordinance. But would Section 161(1)(c) of the Crimes Ordinance apply to illegal file sharing activities on the Internet? The legislative intent of the Computer Crimes Ordinance which introduced Section 161 of the Crimes Ordinance was to clarify and amend the criminal law relating to the misuse of computers, and for related matters. The Magistrate did seem swayed by the argument that the Defendant's intention was to obtain dishonest gain for another (ie the downloaders of his .torrent files). However, no consideration appears to have been given to the first part of Section 161(1) namely "obtaining access to a computer". If "obtaining access to a computer" were to be interpreted as broadly as it appears to have here, then anyone sending spam with false advertisements will also be caught by Section 161(1)(c) of the Crimes Ordinance.
Issue regarding the liability of downloaders
The BT Case leaves some questions unanswered - would BT downloaders also be criminally liable under the Copyright Ordinance and/or the Crimes Ordinance ?
Technically, it might be arguable that third party downloaders could themselves be held to be distributing the files if they enable sharing by other Internet users.
One day after the BT Case verdict, a Swedish court also handed down an Internet piracy conviction. On this occasion, the Swedish court fined the infringer for using a file-sharing tool to distribute one movie although no prison sentence was imposed. However, a number of Swedish lawyers commented that had the illegal uploading involved more than a few movies, the Swedish court would have handed down a prison sentence. The Magistrate's ruling in Hong Kong seems to be in line with overseas developments in file sharing cases against seeders.
Do these recent court victories herald the beginning of the end of Internet piracy ? Or are these court rulings just small victories in a continuing war against Internet piracy? Since the Defendant was arrested in January 2005, the Hong Kong Customs Department has noticed that illegal file sharing activities in Hong Kong have fallen by 80%. The Magistrate sent an unambiguous message to future offenders in Hong Kong as he ended his judgment with the warning that "…[future offenders] might expect greater [prison] terms to be imposed, perhaps not very different to those handed down to sellers of infringing discs".
Soon after the sentencing in the BT Case, seven leading Hong Kong record companies started a civil action in Hong Kong seeking disclosure by Internet service providers of the identities of 22 individuals alleged to have engaged in illegal file-sharing activities including uploading songs through WinMX technology. Internet users in Hong Kong who engage in illegal file sharing activities are now faced with the prospect of both civil and criminal actions.
Although the Magistrate's ruling has no binding effect on other courts, the analysis in the BT Case is likely to have high persuasive value if future file sharing cases are brought before higher courts in Hong Kong. In the meantime, the Defendant is appealing the Magistrate's conviction.
© Gabriela Kennedy and John Tai
The authors are partner and solicitor respectively working in the IP and Technology Media and Telecoms Groups of Lovells in Hong Kong. For further questions regarding the issues raised in this article please contact either author at email@example.com or firstname.lastname@example.org.
1 HKSAR v Chan Nai Ming (TMCC1268/2005)
2 A .torrent file (ie file with the extension .torrent) is a file created by the seeder which contains, amongst other things, the IP address for the seeder computer. The seeder needs to activate the .torrent file to connect the seeder computer to a tracker server, which is a computer responsible for linking downloaders with the seeder computer and with each other, and which enables them to download the files in the .torrent files
3 Section 118(1)(f) of the Copyright Ordinance provides that "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". It should be emphasized that although the wording in S118(1)(f) of the Copyright Ordinance does not expressly specify "attempting to distribute" as an offence, pursuant to Section 159G of the Crimes Ordinance (Cap.200) an attempt to commit an offence is also an offence.
4 BMG Canada Inc. and others v Doe & Ors, 2004 FC 488
5 BMG Canada Inc. and others v Doe & Ors, 2005 FCA 193
6 Secretary for Justice v Choi Sai-lok  4 HKC 334
7 Section 161 of the Crimes Ordinance provides that "Any person who obtains access to a computer-
(a) with intent to commit an offence;
(b) with a dishonest intent to deceive;
(c) with a view to dishonest gain for himself or another; or
(d) with a dishonest intent to cause loss to another,
whether on the same occasion as he obtains such access or on any future occasion, commits an offence and is liable on conviction upon indictment to imprisonment for 5 years."
8 The purpose of the Computer Crimes Ordinance which introduced Section 161 of the Crimes Ordinance was to clarify and amend the criminal law relating to the misuse of computers, and for related matters.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.