Mr Video (Pty) Ltd v Nu Metro Filmed Entertainment (Pty) Ltd

Nu Metro Filmed Entertainment and film producers/distributors (Disney, Fox, Warner, and Videovision - collectively 'the Owners') brought an application against Mr Video (Pty) Ltd and 22 of its franchisees ('the Video Group') for copyright infringement. The Owners owned copyright in various films distributed territorially through a zone-based encoding system (6 zones globally). Zone 1 comprised USA/Canada, while Zone 2 included South Africa. The Video Group imported Zone 1 encoded DVDs from the USA and offered them for hire in South Africa, also providing customers with instructions to decode local DVD players to play the Zone 1 films. Nu Metro claimed to be the exclusive licensee of the Owners for distribution in South Africa. Shortly before the hearing, the Video Group conceded the Owners' copyright ownership and tendered to submit to interdicts and pay the Owners' costs, but contested: (1) Nu Metro's locus standi; (2) the order for delivery up of infringing DVDs; and (3) various costs orders.

• Whether Nu Metro had locus standi to participate in copyright infringement proceedings as an alleged exclusive licensee
• Whether the Zone 1 DVDs lawfully purchased in the USA constituted 'infringing copies' under section 1 of the Copyright Act 98 of 1978
• Whether the court should exercise its discretion under section 24(1) of the Copyright Act to order delivery up of the imported DVDs
• Whether special costs orders were justified given the conduct of the infringing parties

The appeal was dismissed with costs, such costs to include the costs of two counsel. All orders of the High Court were confirmed, including interdicts against the Video Group, delivery up of Zone 1 DVDs, costs of affidavits establishing infringement, costs in favour of Nu Metro, and attorney-client costs in favour of the Owners.

The binding legal principles established are: (1) A distributor or licensee of copyright material has locus standi to participate in infringement proceedings where they can demonstrate a legitimate commercial interest, even if the precise scope of their licensing rights is disputed. (2) Under section 1 of the Copyright Act 98 of 1978, an imported article constitutes an 'infringing copy' if its manufacture in South Africa would have constituted copyright infringement, regardless of whether it was lawfully acquired in the country of origin. (3) In exercising the discretion under section 24(1) to order delivery up of infringing copies, the court may properly consider: the necessity of the order to enforce interdicts, the number of infringers involved, the absence of any lawful use for the infringing articles in South Africa, and the past conduct of infringers indicating likelihood of continued infringement. (4) Territorial copyright restrictions, including regional encoding systems, are enforceable in South Africa, and deliberate circumvention of such systems to exploit copyright works outside the authorized territory constitutes actionable infringement.

The court made observations regarding the conduct of the Video Group that, while supporting the costs award, go beyond the strict legal holdings. Hurt AJA noted disapprovingly that: the Franchisor had considerable experience in the home entertainment market and had engaged in internal debate about the legality of importing USA DVDs as early as 2006, concluding it was probably unlawful and warning franchisees, yet decided to continue the practice; the Video Group acted in a 'flagrant way' in arranging to bypass coding restrictions used by copyright owners; despite legal advice before filing answering papers that there was no defence, the Video Group proceeded with opposition; and the Video Group only capitulated at the 'eleventh hour' when preparing heads of argument. These observations support the inference that the infringement was deliberate and cynical rather than inadvertent, justifying the special costs order. The court also observed that 'the very opposition to the order for delivery indicated a probable intention to deal in the zone 1 DVDs,' suggesting an adverse inference about future intentions from the nature of the opposition mounted.

This case is significant in South African copyright law for several reasons: (1) it clarifies the territorial scope of copyright protection in the digital age and the enforceability of regional distribution systems; (2) it establishes that goods lawfully acquired in one jurisdiction may still constitute 'infringing copies' when imported into South Africa if their local manufacture would have infringed copyright; (3) it confirms that distributors/licensees have standing to enforce copyright even where the exact scope of licensing arrangements is disputed, provided they can show some legitimate interest; (4) it demonstrates the court's willingness to use remedial orders (delivery up) and punitive costs orders (attorney-client scale) to mark disapproval of deliberate copyright infringement, particularly where infringers were aware of the illegality but proceeded nonetheless; and (5) it addresses the application of section 24(1) of the Copyright Act in the context of imported digital media and technological circumvention measures.