In a recent High Court decision Viacom Global (Netherlands) B.V v Scene 1 Entertainment Limited (In Receivership) & Anor the High Court has been required to decide on the priority between the Copyright Act 1994 and the Personal Properties Securities Act 1999.
Scene 1 was the exclusive licensee in New Zealand for DVD titles and had entered into a Licence Agreement with Viacom (a subsidiary of Paramount). The Licence Agreement had not been registered under the Personal Properties Securities Act 1999 (“PPSA”). Under the Licence Agreement Scene 1 was required to provide a substantial Letter of Credit to Viacom and ASB Bank provided that Letter of Credit to Scene 1 along with other advances. ASB and Scene 1 entered into a General Security Deed regarding this arrangement which was registered on the PPSA.
Scene 1 went into receivership and Viacom consequently terminated the Licence Agreement. Receivers appointed by the ASB under the General Security Deed sought to sell a large quantity of DVDs held by Scene 1. Despite having no priority under the PPSA Viacom maintained it had a prior right to the DVDs which overrode the PPSA pursuant to its ownership of copyright and sought an urgent injunction to prevent the sale of the DVDs.
At the hearing before Justice Andrews counsel for Viacom argued that the DVDs constituted “infringing copies” and that the sale by the Receivers would infringe copyright under section 36 of the Copyright Act 1994 (the Act) which prohibits the sale or hire of “infringing copies”. Paramount argued that the DVDs could be non infringing at the time of importation by Scene 1 but then be infringing copies for the purposes of sale in the hands of the Receivers (i.e. that the status of the DVDs could change).
The DVDs had been imported into New Zealand with Viacom’s consent. The key issue at the first hearing was whether the DVDs were “infringing copies” of Paramount movies which they could not be, they were genuine when they were imported and were genuine for the purposes of sale. This was not a case about DVD piracy the DVDs were genuine copies made and imported with consent from the copyright owner. Once the copyright owner had made and sent the copyright goods to New Zealand their subsequent sale could not be against the law.
Her Honour found that sale of the DVDs would not infringe Viacom’s copyright and that ASB had a perfected security interest which had priority over Viacom’s unregistered retention of title claim. Viacom was unable to argue that the sale of the DVDs breached the licence agreement, because that contract was terminated by Viacom on receivership. Despite being the equitable owner of the copyright in the DVDs Viacom had sold the DVDs to Scene 1 which made them subject to the perfected security interest.
Her Honour lifted the injunction and the sale of the DVDs was allowed to proceed which will be to the relief of Toll Logistics who have for the length of the proceedings been storing the DVDs in its warehouse. The quantity of DVDs is said to be the size of a football field and at the date of the first hearing Toll were owed a significant sum for storage of the stock of new release titles which shall be appearing on shelves shortly.
Together with barrister Michael Bos, Hudson Gavin Martin acted for the Receivers in the proceeding. The decision is appealed to the Court of Appeal. An application to stay the High Court decision has been dismissed by the Court of Appeal, with reasons to follow.