XCHRX TOY STATE INDUSTRIAL LTD. v. DENSITY INDUSTRIAL LTD.

HCA 12844/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 12844 OF 1999

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REASONS FOR DECISION

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1. This is an application by the Plaintiff against the Defendant for the continuation of an interlocutory injunction restraining the Defendant from infringing the Plaintiff's copyright in certain drawings relating to the design of various component parts of large scale train sets by manufacturing of selling similar train sets that the Defendant produced.

2. The large scale train sets in question are described by the Plaintiff as item No. 5300 "Classic Express", item No. 5301 "Musical Christmas", item No. 5303 "Nutcracker Express", item No. 2900 "North Pole Talking Station Christmas Express" and item No. 2900S "Nutcracker Express & Station".

3. It is the Plaintiff's allegation that the Defendant sold or offered to sell train sets known as a model No. 771 "Union Pacific Express", model No. 774A "Santa's Christmas Express", model No. 771S "Jacksonville Express" and that such train sets have component parts which are copies of substantial if not all the parts of the train sets manufactured by the Plaintiff.

4. The Plaintiff allege that the train sets produced by the Defendant contain component parts which are very close if not identical copies of the corresponding component parts of the train sets manufactured by the Plaintiff based on drawings which came into existence in 1992 or 1993.

5. It is also the Plaintiff's case that various component parts of the train sets manufactured by the Plaintiff bear embossed markings which clearly indicate that the copyright exists in the designs of the train sets and that Plaintiff is the owner of such copyright.

6. The Defendant, on the other hand, deny any copyright subsist in the drawings of the Plaintiff's train sets. The Defendant suggest that toy trains similar to those manufactured by the Plaintiff have long existed in the market and they all have similar or even identical component parts. The Defendant refer particularly to those produced by a company called "New Bright".

7. The Defendant further suggest that as the Plaintiff's product are just copies from existing products, they cannot claim any copyright over drawings in respect of such products.

8. The Defendant, through one of the directors said that it was a Partney International Limited who supplied two or three sets of toy train samples to the Defendant and requested the Defendant to manufacture such toy trains in accordance with the design of the samples.

9. A Mr. Nelles of Partney told the Defendant that he himself had designed the sample toy trains together with all the components. According to the Plaintiff, Partney was originally one of his customers and that the samples from Partney were in fact originally supplied by the Plaintiff. On this aspect, despite the observation by Miss Tam, I am of the view that looking at all the evidence before this Court, it is indeed a reasonble inference to be drawn that the samples provided by Partney to the Defendant indeed originated from the Plaintiff.

10. The Defendant further suggest that the component parts of the Plaintiff's product bear a number of discrepancies with the Plaintiff's drawings of such components.

11. Quite apart from the evidence that the latest products of the Plaintiff was in fact modification of the original design, as I observe in the course of counsel's submission, there must be similarities between articles of the same type. After all a train is a train just as a car is a car. That does not mean that one cannot produce original drawings of component parts of an existing article and claim copyright over such drawings, otherwise there could not be any copyright over drawings relating to any existing article.

12. The Court has to consider if there is any independent skill, knowledge and labour put into the design or drawings in question. I have, in the course of counsel's submission the chance of looking at the train sets manufactured by the Plaintiff, the Defendant as well as those by "New Bright". I have also briefly compared those train sets with the drawings in question.

13. I am quite convinced that there is indeed a very strong likelihood that the train sets, both from the Plaintiff and the Defendant, were in fact manufactured in accordance with the Plaintiff's design which first came into existence in 1992 and 1993. I am also persuaded that the drawings of the Plaintiff are indeed originals despite the fact that they are drawings of common trains which existed perhaps earlier in this century. I am also persuaded that such originality entitles the Plaintiff to claim copyrights over such drawings.

14. By manufacturing and offering to sell train sets manufactured in accordance with the Plaintiff's drawings, there is indeed a strong arguable case in favour of the Plaintiff that the Defendant had indeed infringed the Plaintiff's copyrights, both in the primary and in the secondary sense despite the observation by Miss Tam to the effect that the Defendant's said products were manufactured outside Hong Kong.

15. At this stage of the proceeding, of course, I need only consider whether there is a serious question to be tried. In this aspect, I have not the slightest hesitation in concluding that there is indeed a serious question to be tried which Miss Tam on behalf of Defendant appears to have conceded.

16. Indeed looking at the evidence in its entirety, I tend to agree with the view expressed by Mr. Yan on behalf of the Plaintiff that the Plaintiff indeed has a very strong case against the Defendant.

17. I am also persuaded that the balance of convenience clearly lies in favour of Plaintiff. As I have said, the drawings in question were made by the Plaintiff in 1992 and 1993, and that the manufacturing of the train sets in accordance with such drawings commenced in 1993 by the Plaintiff.

18. Partney was originally one of the Plaintiff's customers and as I have found, it was Partney who provided the Defendant with the Plaintiff's product as samples for the Defendant to manufacture similar products.

19. The evidence suggests that over the past three years, the sale of the train sets in question by the Plaintiff is very significant in terms of volume and value and it accounts for about 20% of the total turnover of the Plaintiff's business.

20. There is also no dispute that the price of the Defendant's product is significantly lower than that of the Plaintiff, namely by about 20%.

21. On the other hand, the operation of the Defendant is significantly smaller in scale and the manufacturing of the train sets by the Defendant only commenced in 1998 when Partney placed their orders. The Defendant did not advertise their products in question until 1999.

22. In the light of the undisputed evidence, the effort and expenses incurred by the Defendant in the design of the products in question cannot be significant.

23. It is the Defendant's case that the design in fact originated from Partney. In this respect, I agree with Mr. Yan's observation that the Defendant should not be selling such products to any other customers without the express permission of Partney.

24. Despite the ability to do so, the Defendant has not put forward any evidence to show that Partney had given such permission. It is not disputed that as a result of this dispute between the Plaintiff and the Defendant, Partney has undertaken not to deal with the train sets in question.

25. That being the case, the loss to the Defendant by reason of the interlocutory injunction order again cannot be significant.

26. The Plaintiff is of course a substantial entity in very strong financial position and would be able to honour its undertaking as to damages should the court find against it at the end of the day.

27. Looking at the entire background of this matter and the conflicting interests of the Plaintiff and the Defendant, as I have said, the balance of convenience clearly lies in favour of the Plaintiff. That being the case, the Plaintiff must be granted the order that they seek.

28. I, therefore, order that the interim order of Findlay J. granted on 13th August 1999 is to continue until trial or until further order.