THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No: 472/08

MR VIDEO (PTY) LTD

First Appellant
MR VIDEO, CORNER OF DURBAN & RAGLAN STREETS (BELLVILLE)    Second Appellant
MR VIDEO, CLAREMON

Third Appellant
MR VIDEO, DELMAR CENTRE (PAROW)

Fourth Appellant
MR VIDEO, SABLE SQUARE (MILNERTON)

Fifth Appellant
MR VIDEO, VRIJZEE (GOODWOOD)

Sixth Appellant
MR VIDEO, AROMA VILLAGE (BRACKENFELL)

Seventh Appellant
MR VIDEO, 244 VOORTREKKER ROAD (PAROW)

Eighth Appellant
MR VIDEO, CAPE GATE LIFESTYLE CENTRE (BRACKENFELL)
Ninth Appellant
MR VIDEO, 187 VOORTREKKER STREET (BELLVILLE)

Tenth Appellant
MR VIDEO, 94D VOORTREKKER ROAD (GOODWOOD)

Eleventh Appellant
MR VIDEO, VAN RIEBEECK ROAD (KUILSRIVER)

Twelfth Appellant
MR VIDEO, 7/11 CENTRE (KUILSRIVER)

Thirteenth Appellant
MR VIDEO, PARKLANDS

Fourteenth Appellant
MR VIDEO, DURBANVILLE

Fifteenth Appellant
MR VIDEO, MOWBRAY

Sixteenth Appellant
MR VIDEO, GARDENS

Seventeenth Appellant
MR VIDEO, SEA POINT

Eighteenth Appellant
MR VIDEO, LAKESIDE MALL (BENONI)

Nineteenth Appellant
MR VIDEO, CEDAR SQUARE (FOURWAYS)

Twentieth Appellant
MR VIDEO, NORTHCLIFF

Twenty First Appellant
MR VIDEO, THE BUZZ SHOPPING CENTRE (FOURWAYS)
Twenty Second Appellant
MR VIDEO, ALBERMARLE CENTRE (GERMISTON)

Twenty Third Appellant

and

NU METRO FILMED ENTERTAINMENT (PTY) LTD

First Respondent
TWENTIETH CENTURY FOX FILM CORPORATION

Second Respondent
DISNEY ENTERPRISES INC

Third Respondent
WARNER BROS ENTERTAINMENT INC

Fourth Respondent
VIDEOVISION ENTERTAINMENT (PTY) LTD

Fifth Respondent

Neutral citation: Mr Video (Pty) Ltd v Nu Metro Filmed Entertainment (Pty) Ltd (472/08)
[2009] ZASCA 127 (29 September 2009).

Coram:
Harms DP, Lewis, Snyders JJA, Hurt et Tshiqi AJJA

Heard:
27 August 2009

Delivered:
29 September 2009

Summary: Copyright infringement – locus standi of parties to participate in
proceedings to restrain infringement – relief by way of order for delivery up of
infringing articles- special order for costs marking court's disapproval of conduct of
infringing parties.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: High Court, Cape Town (Fourie J sitting as court of first
instance).
The appeal is dismissed with costs, such costs to include the costs of two
counsel.
______________________________________________________________

JUDGMENT
______________________________________________________________

HURT AJA (HARMS DP, LEWIS, SNYDERS JJA et TSHIQI AJA  concurring):

[1] This is an appeal against certain orders granted by Fourie J in the
Cape High Court. The appeal is with his leave. For the sake of clarity and
because there are a number of parties involved, I intend to refer to them as
follows:
(a)
to Nu Metro Filmed Entertainment (Pty) Ltd (the first respondent) as
'Nu Metro';
(b)
to the second, third, fourth and fifth respondents collectively as 'the
Owners' (a reference to the fact that they are the owners of the copyright in
the films with which their application in the court below dealt);
(c)
where I refer individually to any of the Owners, I will use an
abbreviation of its name, ie 'Fox', 'Disney', 'Warner' or 'Videovision';
(d)
to all 23 appellants collectively as 'the  Video Group';
(e)
where I refer to the first appellant individually, I shall call it 'the
Franchisor'.

[2] Nu Metro trades in films in the theatrical (cinema) sector of the film
market in South Africa and also in the rental and retail sales sector of that
market. The Owners are well-known producers and distributors of films in the
entertainment field, save that Videovision is not involved in the production of
films, but, as a substantial part of its business, acquires by assignment the
South African copyright in respect of various films which it distributes in this
country. The Franchisor carries on business as a franchisor of businesses,
conducted under the name 'Mr Video', for the hiring of recorded films to
members of the public for home viewing. The Video Group includes 22 of the
Franchisor's franchisees. The application in the high court related to various
films in which the Owners claimed to own the copyright. These will be referred
to collectively as 'the films'.
[3] Nu Metro discovered that the Video Group were offering DVD
recordings of the films, which they had imported from America, for hire in their
businesses. They therefore brought an application for relief by way of
interdicts, delivery up of infringing articles and costs, based on the contention
that the Video Group's conduct in offering these imported DVDs for hire
constituted an infringement of the Owners' copyright and an infringement of
the exclusive licence rights which Nu Metro claimed to hold as a result of
agreements concluded with the Owners. The Video Group opposed the
application, disputing the Owners' claim to be the copyright owners and Nu
Metro's claim to be an exclusive licensee. They admitted that they had
imported numbers of DVD recordings of the films from the USA, but disputed
the contention that their conduct amounted to copyright infringement. Shortly
before the date on which the opposed application was set down for hearing,

however, the Video Group conceded that the Owners were, indeed, the
owners of the copyright in the films and tendered to submit to the interdicts
sought against them and to an order directing them to pay the Owners' costs.
[4] This tender disposed of some of the issues in the opposed application,
and the issues with which Fourie J was required to deal were the following:
(a)
Nu Metro's locus standi to participate in the application, it being
contended that Nu Metro had not proved that it held valid licences from the
copyright proprietors which entitled it to proceed against The Video Group;
(b)
the Owners' entitlement to an order for delivery up in terms of section
24(1)1 of the Copyright Act No 98 of 1978 ('the Act');
(c)
three separate issues as to costs.
Fourie J found against the Video Group on all of these issues. It is these
adverse findings that the Video Group have sought to challenge on appeal.
The Locus Standi Issue.
[5] The Video Group contended, both in the court below and before us,
that Nu Metro had failed to prove that it was the exclusive licensee of the
Owners. They also submitted that, on a proper interpretation of the licence
agreements which Nu Metro had annexed to the replying affidavit, its rights
were not such as would entitle it to restrain the dealing by the Video Group in
the imported DVDs to which reference has been made. The argument
presented in support of these contentions was complicated but, in my view,
futile. I do not think that it is necessary to decide whether the licence
agreements are valid or what their scope is. At the lowest level, Nu Metro and

1 '(1) Subject to the provisions of this Act, infringements of copyright shall be actionable at the
suit of the owner of the copyright, and in any action for such an infringement or such relief by
way of damages, interdict, delivery of infringing copies or plates used or intended to be used
for infringing copies or otherwise shall be available to the plaintiff as is available in any
corresponding proceedings in respect of infringements of other proprietary rights.'

the Owners have established that Nu Metro is appointed as the only local
distributor of the films. The Video Group have acknowledged that their
conduct infringes the copyright of the the Owners and is accordingly unlawful.
In the premises, Nu Metro was entitled, quite apart from any rights it may
have as a licensee, to join in the proceedings to interdict. The challenge to its
locus standi must accordingly fail.
The Order for Delivery of Infringing Items.
[6] The evidence establishes that copyright proprietors in the film industry
have, for the purpose of controlling the distribution of their films territorially,
divided the world market into six 'zones' of which zone 1 comprises the USA
and Canada, Zone 2 comprises Japan, Europe, South Africa, the Middle East
and Greenland and the remaining four zones are situated in other territories in
the world and need not be further defined for present purposes. The DVD
recordings of films in each zone are electronically encoded. The playback
equipment marketed in each zone is also encoded so as to preclude it from
playing DVDs which are not encoded for that particular zone. Thus a DVD
player sold in South Africa will have a code that enables it to play only DVDs
encoded for zone 2. DVD recordings sold or hired out for home viewing in
each zone have explicit warnings and reservations of rights on their
packaging, advising the user of the copyright limitations to the proposed use
and the penalties that may result from misuse.
[7] According to Fox, Disney and Warner, the DVD recordings of the films
produced for sale in the USA are all sold and supplied with these 'copyright
warnings', inter alia drawing users' attention to the fact that the DVDs are sold
for home viewing in the zone 1 territories only. It is common cause, however,

that the Video Group, having purchased the American products, offered them
for hire from the various outlets operated by the franchisees in the Video
Group,  and also supplied their customers with a pamphlet describing how
local DVD players can be 'decoded' to enable them to play zone 1 films.
[8] The provisions of s 24(1) are quoted earlier in this judgment. The
section gives the court a discretion to order that the infringer should deliver up
all 'infringing copies'. An 'infringing copy' in relation to a cinematograph film is
defined in s 1 of the Act as
'a copy of the film or a still photograph made therefrom; . . .being in any such case
an article the making of which constituted an infringement of the copyright in the . . .
cinematograph film . . . or, in the case of an imported article, would have constituted
an infringement of that copyright if the article had been made in the Republic.'
The Video Group contend that Fourie J erred in ordering The Video Group to
deliver up the zone 1 DVDs in their possession or under their control. The
argument is that the zone 1 encoded DVDs were acquired lawfully from the
USA and that they are, accordingly, not 'infringing copies' as defined. The
submission is that, to establish that the zone 1 DVDs are infringing copies, 'it
would have been necessary for [Nu Metro and the Owners] to allege and
prove that the making of the article in South Africa by the person who as a
fact made the article in the USA would have constituted an infringement of the
copyright in South Africa'. The Video Group contend that no allegation to that
effect has been made in the papers. It is difficult to understand this contention.
The very basis upon which the application is brought by the proprietors of the
copyright in the films is that zone 1 DVDs are not available for lawful
distribution in South Africa. There is no evidence to show that the person who

manufactured the zone 1 DVDs in the USA had the right to do so in South
Africa. In fact the probabilities are overwhelmingly against such a suggestion.
Accordingly, if the DVDs had been made locally by that person, the inference
must be that the making would have constituted an infringement. The attitude
adopted by the Owners in these proceedings is fully in keeping with that
inference. There is accordingly no substance in this contention.
[9] The further submission concerning the order for delivery up is that the
court should have had regard to the fact that the zone 1 DVDs were the
property of the Video Group and the court should have been reluctant to
deprive them of their property rights.  Fourie J rejected this submission. He
held that the order was necessary in the circumstances to enable Nu Metro
and the Owners to monitor and enforce the interdicts. He pointed out that at
least 22 respondents were involved and he surmised that the very opposition
to the order for delivery indicated a probable intention to deal in the zone 1
DVDs. There is a further consideration which warrants an order under s 24(1)
in this case. It is that the infringing DVDs were acquired for an unlawful
purpose and there is no lawful use to which they could be put in this country:
at any rate, no such use could be suggested by counsel for the Video Group.
The history of the Video Group's conduct with regard to its use of the zone 1
DVDs also militates against any suggestion that Nu Metro and the Owners
would be properly protected if an order for delivery up was not made. As
indicated, this was a matter involving the exercise of a discretion by the lower
court. I consider that the learned judge correctly exercised his discretion in
favour of the grant of the order for delivery.

Costs
[10] The three orders as to costs made in the court below and challenged
on appeal are the following:
(a)
the order that the costs of the application should include the costs of
various affidavits aimed at establishing infringing conduct on the part of a
number of the Video Group in their respective franchise businesses;
(b)
the order that the Video Group pay Nu Metro's costs in the application;
(c)
the order that the costs of the Owners be taxed and paid on the
attorney and client scale.
[11] The Video Group's submission in relation to the costs of the affidavits is
that they (the Video Group) had made no secret of the fact that the
franchisees were dealing in zone 1 encoded DVDs which they had imported
from the USA. Accordingly, so the submission runs, it was unnecessary for Nu
Metro and the Owners to produce evidence of individual acts of infringement
by individual franchisees. The short answer to this submission is that, until the
answering affidavit was delivered, Nu Metro and the Owners had no way of
knowing what the Video Group would put in issue. It is significant that the
Video Group challenged Nu Metro and the Owners' evidence of the existence
of the licensing agreements on the ground that the relevant contract
documents were not put up with the founding papers. In those circumstances,
it hardly lies in the Video Group' mouths to object to the delivery of affidavits
proving individual acts of infringement. The decision to allow Nu Metro and
the Owners these costs was correct.

[12] The order for attorney and client costs was also fully justified. The
deponent for the Franchisor is a man with considerable experience in the
home entertainment market. There had been a debate (I put in no higher for
the purposes of this issue) amongst the Video Group as early as 2006, as to
the legality of importing DVDs from the USA for use in the Video Group's
businesses. The conclusion then was that such conduct was probably
unlawful and the Franchisor had circulated a warning to its franchisees that
this was the case. However it seems that the Video Group decided to
continue with their conduct and bide their time until faced with an application
for an interdict. The flagrant way in which the Video Group arranged to bypass
the coding restrictions used by the copyright owners for the obvious purpose
of controlling the exploitation of their rights, also has considerable significance
in this context. After the application had been brought, and before the
answering affidavit was filed, the Franchisor was advised by its attorney that
the Video Group had no defence to the application. Nevertheless the Video
Group delivered an answering affidavit opposing the relief sought. It was only
at the eleventh hour, when the heads of argument were being prepared, that
the Video Group capitulated in respect of the copyright owners. The decision
by Fourie J to mark his disapproval of this conduct by a special costs award
was fully justified.
[13] The award of costs in favour of Nu Metro was warranted on the basis
that the opposition to Nu Metro's participation in the application was
unsuccessful.

The appeal is dismissed with costs, such costs to include the costs of two
counsel.

_______________________
N V HURT
ACTING JUDGE OF APPEAL

Appearances:
Counsel for Appellant:
A R Sholto-Douglas SC

R D E Gordon

Instructed by
De Klerk & Van Gend, Tyger Valley
E G Cooper Majiedt Inc, Bloemfontein

Counsel for Respondent: P Ginsburg SC

G Marriott

Instructed by
Nortons Incorporated, Johannesburg
McIntyre Van der Post, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From: The Registrar, Supreme Court of Appeal
Date: 29 September 2009
Status: Immediate
Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal

MR VIDEO (PTY) LTD & OTHERS v NU METRO FILMED ENTERTAINEMENT (PTY)
LTD & OTHERS

The Supreme Court of Appeal today gave judgment in the dispute between the Mr Video
franchises as appellants, and Nu Metro, 20th Century Fox, Disney Enterprises, Warner Bros.
and Videovision Entertainment (Pty) Ltd as respondents. The Cape High Court had granted
Nu Metro and its fellow respondents an interdict against the infringement of their copyright
in DVD copies of various films. The High Court had also ordered the Mr Video group to
deliver to the Nu Metro group all the infringing DVD copies of the films in their possession
or under their control. The High Court had expressed the view that the defence raised by the
Mr Video group to the claims for infringement and delivery of infringing articles had not
been bona fide and that at least part of their purpose was to delay the enforcement of the Nu
Metro group's rights to protect the copyright.  It had accordingly ordered the Mr Video group
to pay the costs of the Nu Metro group on the attorney and client scale as a mark of its
disapproval of their conduct.
The Supreme Court of Appeal dismissed the appeal of the Mr Video group against the High
Court's judgment. It noted, in addition to the factors mentioned by the High Court as
warranting an attorney and client costs order, that the Mr Video group had furnished its home
video rental customers with instructions on how to modify their DVD players to enable them
to view films recorded on the infringing DVDs which were specially coded to prevent them
being played on ordinary equipment purchased in South Africa. It accordingly confirmed all
the orders made in the High Court and ordered the Mr Video group to pay the Nu Metro
groups costs of appeal.

--ends--