THE WELLCOME FOUNDATION LTD. v. ATTORNEY GENERAL

HEADNOTE

    Discovery - Action for - Patent and Trade Mark Infringement - whether case made out - Section 60 Patent Act 1977 - Section 271 (Trade Marks Ordinance - Administravive Inconvenience - Terms of Order.

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J U D G M E N T

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1. The plaintiffs are internationally renowned manufacturers and distributors of pharmaceutical products and they have brought this Norwich Pharmacal action against the Attorney General in order to attempt to ascertain who has been importing into Hong Kong some of their products allegedly in breach of their trademark and patent rights. The Attorney General is sued because this information is said to be in the possession of the Trade Department. Let me hasten to add at once that no impropriety or wrongdoing is alleged against any department of the Hong Kong Government. Let me also record that the plaintiffs accept that if an order is made it should be on terms that they pay the cost involved in compliance with the order and also the costs of this action.

2. This type of action gets its name from the landmark decision of the House of Lords in Norwich Pharmacal v. Custom & Excise [1974] A C. 134 where the House held;

"(1)    that where a person, albeit innocently and without incurring any personal liability, became involved in the tortious acts of others he came under a duty to assist one injured by those acts by giving him full. information by way of discovery and disclosing the identity of the wrong-doers, and for that purpose it matters not that such involvement was the result of voluntary action or the consequence of the performance of a duty statutory or otherwise; and that, accordingly, prima facie the respondents were under a duty to disclose the information sought."

Lord Reid set out the position with his usual clarity in two passages. At p.175 he said;

"My noble and learned friends, Lord Cross of Chelsea and Lord Kilbrandon, have dealt with the authorities. They are not very satisfactory, not always easy to reconcile and in the end inconclusive. On the whole I think they favour the appellants, and I am particularly impressed by the views expressed by Lord Romilly M.R. and Lord Hatherley L.C. in Upmann v. Elkan (1871) L.R. 12 Eq. 140; 7 Ch.App. 130. They seem to me to point to a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to. facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers. I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did. It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration.

I am the more inclined to reach this result because it is clear that if the person mixed up in the affair has to any extent incurred any liability to the person wronged, he must make full disclosure even though the person wronged has no intention of proceeding against him. It would I think be quite illogical to make his obligation to disclose the identity of the real offenders depend on whether or not he has himself incurred some minor liability. I would therefore hold that the respondents must disclose the information now sought unless there is some consideration of public policy which prevents that."

At p.176 he said;

"Protection of traders from having their names disclosed is a more difficult matter. If we could be sure that those whose names are sought are all tortfeasors, they do not deserve any protection. In the present case the possibility that any are not is so remote that I think it can be neglected. The only possible way in which any of these imports could be legitimate and not an infringement would seem to be that someone might have exported some furazolidone from this country and then whoever owned it abroad might have sent it back here. Then there would be no infringement. But again that seems most unlikely.

But there may be other cases where there is much more doubt. The validity of the patent may be doubtful and there could well be other doubts. If the respondents have any doubts in any future case about the propriety of making disclosures they are well entitled to require the matter to be submitted to the court at the expense of the person seeking the disclosure. The court will then only order discovery if satisfied that there is no substantial chance of injustice being done."

3. Mr. Fitzpatrick, who appeared for the Attorney General, opposed the discovery order sought on the grounds that there was no wrongdoing. He took a number of points on patent and trademark law which he submitted indicated that if the plaintiffs were to sue the importers concerned their action would fail. He submitted that unless a strong case of wrongdoing was made out the court should not grant the order, which even in its more restricted form of being limited to the last 12 months, would still be onerous for the Trade Department to comply. Mr. Andrew Liao Q.C. who appeared with Mr. Tay contended that the plaintiffs had made out their case on patent and trademark infringement, and that the order should be made. He relied heavily on the fact that 2 of the 3 products concerned were important drugs and thus there was an element of public interest in favour of making the order.

The facts

4. The plaintiff is a company incorporated in England and is a wholly owned subsidiary of Wellcome Plc. which is well known as one of the largest pharmaceutical companies in the world. Wellcome has subsidiaries all over the world.

5. Wellcome manufacture a wide range of pharmaceuticals as well as a range of cosmetic products. In 1990 Wellcome's turnover for human health care products was £.47b. Wellcome is committed to producing products of the highest quality and spends considerable sums on research and development and has been awarded the Queen's Award for technical achievement in the years 1986, 1987 and 1990.

6. One of Wellcome's products is a drug called acyclovir which is sold under the trade name Zovirax. This drug is used effectively for the treatment of herpes, cold sores and other viral infections. It is the only specific anti herpes agent available and it took Wellcome some 9 years to develop.

7. On the 6th September 1978 Wellcome were granted a U.K. Patent in respect of acyclovir. The patent was registered in Hong Kong in 1979 pursuant to the Registration of Patents Ordinance. This patent is valid and subsisting and no challenge has been made to it. Patents have been granted to Wellcome in respect of Acyclovir in numerous countries around the world.

8. Zovirax is produced in cream and tablet form. Wellcome has registered the trademark Zovirax in Class 5 in respect of pharmaceutical products in Hong Kong under Registration No. 914 of 1979. Wellcome has also registered the distinctive Zovirax tablet as a device mark in Class 5 under Registration No.387 of 1985. Both Registrations are valid and subsisting.

9. The trademark Zovirax and Zovirax Device are registered by Wellcome and/or their subsidiaries in numerous countries throughout the world. The trademark Zovirax is registered in Portugal by a wholly owned subsidiary of Wellcome, which I will call Wellcome (Portugal).

10. The total worldwide sale of Zovirax in 1990 was 75m. It is in fact Wellcome's largest selling product. Mr. Adams, who is a barrister employed by the plaintiffs as an Assistant Trademark Manager, deposes as follows:

"In the markets where it is sold Wellcome has acquired substantial goodwill and reputation in the mark Zovirax. The mark Zovirax when used in relation to Acyclovir indicates both to the trade and public a quality product manufactured by Wellcome."

11. Acyclovir is manufactured by Wellcome in the United Kingdom and is then sold to subsidiaries for marketing in various countries. Wellcome has authorized Burroughs Wellcome & Co. (HK) Ltd. [Wellcome (HK)] a wholly owned Hong Kong subsidiary of Wellcome, to distribute Zovirax in Hong Kong, China and Macau. Zovirax sold in Hong Kong is packaged in boxes specifically designed for the South East Asian market and bears a "usage label" as required by Hong Kong law.

12. Sales of Zovirax in Hong Kong have grown steadily over the years. During 1990 and 1991 Wellcome spent over HK$500,000.00 promoting Zovirax in Hong Kong. Wellcome (HK) is the only company authorized to distribute and market Zovirax in Hong Kong. Mr. Adams deposes that "no other person, firm or company is expressly or impliedly authorized to make, sell, use or import Zovirax in Hong Kong".

13. Zovirax is available to the general public in Hong Kong over the counter. Acyclovir is a drug which is subject to the provisions of the Pharmacy and Poisons Ordinance which requires the drug to be registered with the Pharmacy and Poison Board. Importation of Zovirax into Hong Kong requires an import license which is only obtainable from the Trade Department on production of the Product Registration Certificate. Wellcome has obtained a Product Registration Certificate in respect of Zovirax cream and Zovirax tablets. It is obligatory under the Pharmacy and Poisons Regulations for a drug sold in Hong Kong to display the product registration number on the packaging.

14. In relation to Portugal, Wellcome has authorized Wellcome (Portugal) to market Zovirax there. This License Agreement was exhibited to Mr. Adams' affidavit and it can be seen from this that the license extends to Portugal only and Wellcome (Portugal) is not authorized to market Zovirax anywhere outside Portugal. Zovirax sold by Wellcome (Portugal) in Portugal is manufactured by Wellcome in the United Kingdom in batches which are designated specifically for the Portuguese market. Portuguese designated Zovirax is packaged in special Portuguese packaging.

Hazeline, Hazeline Snow

15. Wellcome manufactures a line of cosmetics which is marketed by reference to the trademark Hazeline Snow and/or Hazeline. The trademark Hazeline Snow was used in 1982 in the United Kingdom in respect of skin cream and lotion. This product range includes Hazeline Snow Skin Cream, Hazeline Body Talc, Hazeline Facial Foam, Hazeline Body Foam, Hazeline Beauty Soap and Hazeline Light Lotion. The Hazeline and Hazeline Snow ranges were introduced in Hong Kong as long ago as 1940 and are now sold in a number of countries in South East Asia including China, Hong Kong and Macau. It is a very important product manufactured by Wellcome especially in Asia. Wellcome's South East Asian sales of the Hazeline range of products in 1989/90 were over US$8.89m. In Hong Kong for 1989/90 sales were US$3.15m. In the same year, the sale in China was US$3.89m. Wellcome spent over US$1m. on advertising and promoting the Hazeline range around Asia during 1988/89 of which a significant portion was spent in Hong Kong, Macau and China.

16. The trade names Hazeline, Hazeline Snow and the Hazeline Snow Mountain Device have been registered in Hong Kong by Wellcome. Further, Wellcome's famous Unicorn Device has been registered in Hong Kong. All the marks referred to are prominently displayed upon the outside packaging and the product itself.

Mr. Adams deposes that:

"In the markets where it is sold, Wellcome has acquired substantial goodwill and reputation in its Hazeline and Hazeline Snow range of products. These marks when used in relation to Wellcome's skin care products indicate both to the trade and the public high quality goods manufactured by Wellcome."

17. Wellcome has also registered the Hazeline Snow and Hazeline & Mountain Device trademarks in numerous countries around the world. Wellcome has secured registration of one or more of these marks in approximately 50 countries. There are pending applications in over 20 countries. The whole range of Hazeline and Hazeline Snow marks are registered trademarks in Indonesia. Further, the Wellcome signature mark is registered in Class 3 in Macau.

18. As the Hazeline range is targeted mainly at Asian markets it is manufactured in Asia and not in the United Kingdom. Wellcome has subsidiaries in Hong Kong, Indonesia, Malaysia, Philippines, Singapore and Thailand. All these subsidiaries source Hazeline products under a Trademark License Agreement or Registered Users Agreement with Wellcome. These agreements enable the subsidiaries to manufacture various products from the Wellcome product range in accordance with Wellcome's instructions and to market these under Wellcome's trademarks in their own respective territories. Mr. Adams produces a copy of the Trademark License Agreement granted by Wellcome to its Indonesian subsidiary P.T. Wellcome (Indonesia). This company is a joint venture company owned 80% by Wellcome and 20% by an Indonesian party. It can be seen from this agreement that this subsidiary is only authorized to manufacture and distribute products including Hazeline products within its territory and it is forbidden from supplying the stipulated products outside of Indonesia. The Indonesian company in turn sells and distributes Hazeline products in Indonesia through one distributor, namely P.T. Pebapan pursuant to a distribution agreement entered into on the 3rd December 1984. By Clause 3(xxii) the distributor undertook not to sell Hazeline products outside Indonesia or within Indonesia for export.

19. Mr. Adams deposes that Wellcome does not consent to or authorize Hazeline products manufactured pursuant to the agreement with it's Indonesian subsidiary being imported into Hong Kong or any where else outside the territory as defined in that agreement. He also produces a Registered User Agreement entered into between Wellcome and its Malaysian wholly owned subsidiary. Again this agreement permits Wellcome (Malaysia) to manufacture and deal in Hazeline products only for the Malaysian market.

20. As with Zovirax Wellcome (HK) is responsible for marketing the Hazeline range of products in Hong Kong, Macau and China. Wellcome (HK) obtains supplies of Hazeline products from Wellcome's subsidiary in Singapore. Wellcome (Singapore) sources Hazeline products from a contract manufacturer in Singapore which is authorized to sell the products only to Wellcome (Singapore). Wellcome (Singapore) is expressly authorized to export Hazeline products to Wellcome (HK) for sale in Hong Kong, Macau and China.

Distribution Policy

21. In order to ensure that Wellcome's products reach consumers worldwide Wellcome has established an extensive global distribution network. Wellcome owns all the intellectual property rights in relation to it's products and it manufactures wherever possible its range of products in the United Kingdom. These products are then marketed in different countries through Wellcome subsidiaries or authorized distributors of a license in respect of these countries. However, as I have set out above in relation to the Hazeline range Wellcome has also granted licenses to various subsidiaries and joint venture companies in various places in the world to manufacture particular products from their product range and has licensed them the necessary technology to do so.

22. It is clear on the evidence that it is a condition of all licenses granted by Wellcome that the licensee only distributes Wellcome's products within strictly defined territorial limits. Wellcome's subsidiaries and/or authorized distributors are prohibited from exporting products manufactured under license and/or products purchased from Wellcome out of their territories. This is a well-established procedure of Wellcome and it is strictly observed. However, in the second affidavit of Mr. Ho Sau On for Wellcome he does point out that there have been occasions in the past when the Singapore subsidiary which supplies all Hazeline Snow products to Wellcome (HK) has been unable to meet supply requirements due to product shortages. In those circumstances, which occur, he says, very rarely, Wellcome (Singapore) has sourced Hazeline Snow products from Wellcome's Indonesian or Malaysian subsidiaries and the goods are shipped directly from Indonesia or Malaysia as required. Since November 1988 there have been only two occasions when Hazeline Snow was imported by Wellcome (HK) from Indonesia and two occasions when it was imported from Malaysia. Such shipments are made with a special authority of Wellcome which has to maintain some level of flexibility in the working of it's distribution network.

23. In paragraph 25 of Mr. Adams' affidavit he contends that these operating conditions which Wellcome imposes make good commercial sense. It is obvious, he says, that Wellcome would not countenance local subsidiaries or authorized distributors competing with one another as well as with its competitors to the detriment of Wellcome and its customers.

24. In paragraph 26 of his affidavit Mr. Adams makes the point that the rationale behind the strict discipline imposed by Wellcome as regards unauthorized importation is that their business is principally concerned with the manufacture and distribution of human pharmaceutical and cosmetic products which must be maintained, transported and stored in accordance with the strictest standards. Anything less would be contrary to the public interest, and would run the risk of introducing sub-standard and possibly dangerous products onto the market. For this purpose, he submits, it is vital that Wellcome is able to supervise and monitor the storage and distribution of its products and the form in which they are sold including any instructions or directions for use. He points out that Wellcome (HK) has access to, and user of, Wellcome approved storage facilities including where necessary cool rooms and refrigerators for storage of heat sensitive products. Further, he points out, that Wellcome must have a means of tracing its products in the event that a recall of products is necessary. This can only be carried out through recognized and monitored chains of supply. He also tells the court that Wellcome has been forced to recall all supplies of a particular product from a market as a result of the product being contaminated on a random basis by a third party with the intention of extracting a ransom from Wellcome. The swift and complete recall of the product was essential to the well being of the public and could not have been achieved if Wellcome had been unable to identify all outlets selling its products.

Infringement

(a)Zovirax

25. In December 1989 it came to the notice of Wellcome (HK) that a number of pharmacies in Hong Kong were selling Zovirax that should have been destined for the market in Portugal. The Zovirax in question was in Wellcome (Portugal) packaging and included dosage use instructions in the Portuguese language alone. Wellcome (HK) suspected that Zovirax's destined for the Portuguese market was being purchased by dealers in Macau and diverted to Hong Kong. A firm of investigators were instructed in Hong Kong to conduct a survey of 48 pharmacies suspected of selling Portuguese Zovirax. A report by Fact Finders Ltd. in May 1990 was exhibited. This report show that there was a problem of unauthorized Zovirax coming into Hong Kong, but it was impossible to identify at that time any pattern of distributorship.

26. Wellcome attempted to deal with the situation by embarking upon an education and^- warning campaign whereby pharmacies and distributors of pharmaceutical products were alerted to the dangers of dealing in Wellcome products from unauthorized sources. Notices were published in a number of newspapers in Hong Kong and immediately thereafter letters were sent to over 800 pharmacies in Hong Kong. Stronger letters were sent to a further 14 pharmacies. It was hoped that this campaign would result in the pharmaceutical trade in Hong Kong being made to realize that it was not in it's interest nor in the public interest for Wellcome products, including Zovirax, to be sourced other than from authorized distributors appointed by Wellcome.

27. Unfortunately, this educational campaign was not a great success. In April 1991, Wellcome (HK) reported to Wellcome that 10 pharmacies in Hong Kong were known to them to still be dealing in unauthorized Zovirax and many more were suspected. Further investigations were conducted but these achieved little. Following the advertisement campaign, pharmacies became very cautious about how they dealt with the unauthorized product, mixing it with authorized products, taking it off the shelves and hiding it under the counter and selling tablets without packaging to disguise its source.

28. Further enquiries came to naught and eventually Wellcome instructed Baker and Mackenize to make enquiries from the appropriate Government Departments to establish whether any other person, firm or company had applied for and been granted a Product Registration Certificate or applied for an import or export licenses in respect of Zovirax. Baker and Mackenize first wrote to the Commissioner of Customs and Excise on the 4th April 1991. The Commissioner told them that they should address their enquiries to the Department of Health and to the Trade Department. Baker and Mackenize wrote to the Director of Health and the Director General of the Trade Department requesting this information. The Director of Health responded by advising that only Wellcome (HK) had been granted a Product Registration Certificate in respect of Zovirax. The Trade Department replied that only Wellcome (HK) had been issued import licenses in respect of Zovirax for the purposes of local consumption, but that another company had applied for import licenses covering Zovirax which had been declared were for re-export purposes. The Trade Department refused to disclose the identity of this company.

29. In paragraph 33 of this affidavit Mr. Adams stated his belief that the importation of Zovirax through unauthorized channels constitutes infringement of Wellcome's patent and trademark rights in Hong Kong, even if the product that is imported is subsequently re-exported. If a shipment of unauthorized Zovirax were to be shipped from Portugal to Macau it would have to pass through Hong Kong where it would be transhipped to Macau. Once the product is in Macau Mr. Adams is of the view that it could easily be hand-carried back into Hong Kong being light in weight and large quantities could be concealed in personal luggage. He goes on to submit that the importation of unauthorized Zovirax is causing great damage to Wellcome (HK)'s business and is putting the public at risk. Wellcome, therefore, wishes to identify the person, firm or company which is importing Zovirax into Hong Kong, and if it obtains this information it intends to take legal proceedings against such persons for infringement of Wellcome's patent and trademark rights. Wellcome contend that they have no means of identifying the entity which has applied for import licenses as advised by the Trade Department other than by disclosure from the Trade Department.

30. Mr. Fitzpatrick for the Attorney General attempted to take issue with this point and submitted that Wellcome ought to embark upon a series of Anton Pillar injunction applications in order to see whether they could find the information in that way. He suggested that they ought to exhaust that sort of remedy before embarking upon this sort of action. Mr. Liao tells me, and I accept, that very careful consideration has been given to this course of action, but it has been decided that it would be unlikely to bear fruit and it would involve, perhaps, a number of sets of proceedings none of them certain to lead to the offending importing party.

(b) Hazeline

31. Wellcome has known for some time that large quantities of unauthorized Hazeline Snow Skin Cream and Beauty Soap were being imported into Hong Kong. These were then either being sold in Hong Kong or transhipped to Macau or China causing damage to Wellcome (HK)'s market. In November 1990, Wellcome (HK)'s sales team discovered unauthorized parallel imported Hazeline Snow being sold at various pharmacies around the Sheung Wan area in Hong Kong. Examples were purchased and it was found to be sourced from Indonesia.

32. Wellcome then discovered that this unauthorized importation of Hazeline products into Hong Kong was affecting sales of the authorized products. Mr. Ho, the Area General Manager of Wellcome (HK), informed Mr. Adams that Wellcome (HK)'s sales performance in relation to the Hazeline products in Hong Kong in the financial year September 1990 to August 1991 will be approximately HK$lm. less than it would otherwise have been as a result of competition caused by parallel imports.

33. Mr. Ho also told Mr. Adams that Wellcome (HK) has found very large quantities of Indonesian made Hazeline products in Macau and China. Only Wellcome (HK) is authorized by Wellcome to sell these products in Macau and China, and Wellcome (HK) does not source Hazeline products from Indonesia. Mr. Adams contends that any parallel imported Hazeline product that makes its way to Macau from Indonesia must pass through Hong Kong. He points out that there is no container port in Macau and the goods therefore travel by container to Hong Kong and unloaded here to be ferried by a lighter or barge to Macau. In relation to China, he suggested it is technically possible for Indonesian made products to be sent direct to a port in China, but this is very unlikely to happen in practice since China's duty is 300% on cosmetics and Hazeline Snow is considered to be a cosmetic. Importers of unauthorized products are most unlikely to use a port in China and thereby risk having to pay substantial duty. What Mr. Adams believes happens in practice is that the products are shipped to Hong Kong and then on to Macau. From Macau they are hand-carried or otherwise smuggled into China in such a way so as to avoid the payment of duty.

34. Mr. Adams states that in November 1990 Wellcome (HK)'s Commercial Manager travelled to Macau to try to find out more about the problem of unauthorized Hazeline products in Macau. Mr. Lee, who was the Commercial Manager, informed Mr. Adams that he found shops around the border gate area of Macau stocked with unauthorized Hazeline products, despite the fact that the appointed Wellcome wholesaler in Macau did not distribute to any shops in that area. Various photographs were taken. Mr. Lee concluded that much of this product was being hand-carried over the border. In July 1991, Mr. Adams himself visited the border gate area and saw the shops that Mr. Lee had previously photographed still stocked with unauthorized imports of Hazeline.

35. Mr. Adams tells me that Wellcome (HK)'s market for Hazeline products in China is being devastated by the unauthorized trade that is taking place. Hazeline Snow is an authorized quota product (Hazeline Soap is not), which means that quota is required from the Chinese Government prior to importation of the product into China. Quota is earned on the basis of past sales performance. For the 6 months from January to June 1991 Wellcome was awarded quota to import Hazeline Snow of value US$1.5m. into China.However, due to the substantial amounts of parallel imported product that is available' in China Wellcome was unable to use more than 20% of this quota. This has the knock on effect that Wellcome may well lose much of its quota entitlement for the rest of the year. Sales of authorized Hazeline Snow in China have reduced dramatically from HK$17.7m. in 1989/90 to HK$12.2m. up to June 1991.

36. In Hong Kong the importation and exportation of cosmetics into and out of Hong Kong is prohibited by s.1(a) of the Dutiable Commodities Regulations except on the authority of an import or export license granted by the Commissioner of Customs and Excise. Hazeline Snow Skin Cream is deemed to be a cosmetic under that Ordinance (Cap.109). On the 4th April 1991, Baker and Mackenize wrote to the Commissioner to request details of the identity of those parties who had applied for and/or been granted import/export licenses in relation to Hazeline Snow. If this information had been given, Wellcome would have taken legal action against those parties to prevent infringement of its rights. The Commissioner has refused to provide Baker and Mackenize with any information as to the identity of the importer/exporter of these products. By letter dated 4th July 1991, the Commissioner of Customs and Excise has refused to provide information on the basis that, firstly, there is no trademark infringement in the circumstances set out above, and secondly, that to make the disclosure sought would cause injustice.

37. Mr. Adams in his affidavit takes issue with the commissioner's assertion in relation to the infringement, and I will come to deal with that point when I deal with the legal submissions that have been made to me. Mr. Adams also takes issue with the Commissioner that disclosure might impair or hamper the efficient conduct of the statutory duties of the Department, or may be prejudicial to those whose identity is so disclosed, and that there is a risk of injustice being perpetrated. Mr. Adams denies that there are any public policy considerations which prevent disclosure of this information. He submits that Wellcome has a good cause of action against the importer in Hong Kong of trademark infringement and that the injustice that will be caused to Wellcome and to the public if Wellcome is powerless to act against parties infringing its intellectual property rights would far outweigh any prejudice that might be suffered by the infringer.

38. Mr. Adams goes on to state that if the Commissioner should disclose the names and addresses of those importing unauthorized Hazeline products into Hong Kong, Wellcome will most certainly take legal action against them for trademark infringement. He also refers tothe fact that on the one occasion that Wellcome was able to identify the importer of unauthorized Hazeline products into Hong Kong, legal proceedings were immediately commenced. This occurred in July 1991 when Wellcome discovered that 2 containers of unauthorized Hazeline product (mixed in with other goods) were due to arrive in Hong Kong from Indonesia en route to Macau on that date. An injunction was immediately obtained restraining the goods from leaving Hong Kong. Negotiations then ensued with the defendant and the shippers which resulted in the goods being sent back to Indonesia. Copies of the relevant court documents and the consent order of 23rd July 1991 were produced by Mr. Adams.

39. Finally, Mr. Adams points out that although they were able to take action against this one parallel importer, the scope of the problem suggests that other parties are also involved. Wellcome currently have no other investigative leads to follow up, and therefore will be unable to act to protect their markets and the public from unauthorized products unless the Commissioner provides the disclosure that is now being sought.

The Law

40. In the light of the above factual scenario Mr. Liao submits that the plaintiff has clearly made out its case for an Order. However, in the light of the grounds of opposition, it is necessary to consider the legal position.

ACYCLOVIR - The Patent

41. It has not been suggested that the Patent Act 1977 does not apply in Hong Kong. [see National Research Development Corporation v. Wellcome Foundation, Aldous J. unreported 22/7/1991 and The Improver Case (1990) 1 HKLR 33, Mayo J.] There is no dispute about the validity of the patent for acyclovir.

42. The starting point is s.60(1) of the 1977 Patent Act which provides as follows:

"    Infringement

60. - (1) Subject to the provisions of this section, a person infringes a patent for an invention if, but only if, while the patent is in force, he does any of the following things in the United Kingdom in relation to the invention without the consent of the proprietor of the patent, that is to say -

(a) where the invention is a product, he makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise;

(b) where the invention is a process, he uses the process or he offers it for use in the United Kingdom when he knows, or it is obvious to a reasonable person in the circumstances, that its use there without the consent of the proprietor would be an infringement of the patent;

(c) where the invention is a process, he disposes of, offers to dispose of, uses or imports any product obtained directly by means of that process or keeps any such product whether for disposal or otherwise."

43. This section clelarly covers importation and disposal.

44. Wellcome has been granted 2 Portuguese Patents and they have granted licences in relation to these with restrict sale outside of Portugal. No authority has been given by Wellcome to sell the Portuguese products in Hong Kong. Mr. Liao contends for the following proposition which he submits is supported by authority;

"If the Patentor grants a licence to use the patent in country A, this does not imply permission to sell the article manufactured under that licence in violation of the grantors patent in another country."

45. This proposition is supported by The Societe Anonvme Case (1883) 25 Ch. D. 1, a decision of the Court of Appeal which distinguished the earlier case of Betts v. Willmott L.R. 6 Ch. 239. The latter case turned on its own facts. The owner of an English patent manufactured the patented article in France as well as in England. In a suit to restrain the sale of the article in England, the plaintiff proved that it was not made at his manufactory in England but could not prove that it was not made at his manufactory in France.

46. Other cases were cited to which I need not refer as I am satisfied that the proposition set out above is sound.

47. I am also satisfied that the sale of the drug by Wellcome (Portugal) in Portugal is not to be considered a sale by Wellcome itself or through its agent. Mr. Liao submits that even if this conclusion were not correct Wellcome has specifically reserved its rights under the U.K. Patent as extended to Hong Kong by clear notice to importers, dealers and retailers. Mr. Liao relied upon Gillette v. Bernstein (1941) 58 RPC 271 where at p. 281/2 The Master of the Rolls said this:

"The law relating to the obligations of purchasers in regard to patented articles when the patentee has imposed conditions as to the user of the article, is I think, for present purposes quite clear. Mr. Marlow, on behalf of the appellants, endeavoured to establish the proposition that knowledge of.the restrictive condition at the time of the purchase by the Defendant of the goods which he subsequently resold in the manner complained of, was not essential. Without going into the authorities which have been cited to us, it seems to me to be established that in order to succeed in a claim of this kind the burden lies upon the patentee to show, in addition to other matters which have to be shown, that the Defendant had the restrictive condition brought to his notice at the time when he acquired the goods, and that it is not sufficient to show that that condition came to his notice in the interval between his acquisition of the goods and his disposal of them. That appears to me to be the quite clear statement of the law to be extracted, not merely from the judgment of the Privy Council delivered by Lord Shaw in the case of National Phonograph Co. of Australia v. Menck [1911] A.C. 336, but also from other earlier English authorities which are referred to in the judgment there. I do not propose to go into them. Not only is that matter now settled but it also appears to me that knowledge at that moment of time must be the only relevant knowledge for this purpose, once the principle upon which a person acquiring a patented article is affected by restrictions of this kind is appreciated. I do not wish to say anything more on that subject because I think it undesirable to endeavour to improve by language of my own the clear statements of the law by Judges who have preceded me."

48. It seems to me clear that the plaintiff did all that they could to bring this matter to the attention of the necessary category of persons. They advertised the fact. They sent out 800 letters. It was clearly public knowledge that these goods could not be imported into Hong Kong from Portugal. It will be recalled that after the letter was sent out pharmacists became cautious which is strong evidence that the matter was effectively brought to their attention. I was also referred to paragraph 6.33, 6.36 and 9.63 of Terrells Law of Patents 13th edition. I should also add that there was evidence that on 23rd May 1991, Zovirax sourced from Portugal was purchased in North Point and that was after the notices had been sent out.

49. Mr. Fitzpatrick contends that where the plaintiff is in a position to control sale or to give a warning of the circumstances restricting use of the goods and when he fails to do so, the purchaser takes without the limit of th.e licence. He says that this is a case of a wholly-owned subsidiary selling the product. There is no express limitation on the box. He asks the court to assume that the sale in Portugal to a wholesaler must have been without express notice of limitation. He went on to refer to the three cases which I have referred to above.

50. Mr. Fitzpatrick went on to contend that acyclovir could have been imported for the purposes of re-export. However contaminated acyclovir has been found in a doctor's surgery in Hong Kong. Mr. Fitzpatrick submitted that this could have come from China or Macau and been smuggled into Hong Kong.

51. Mr. Fitzpatrick's basic submission is that the evidence here is not strong enough to justify the order sought. For Norwich Pharmacal relief, he submits, one requires a very strong case. He submits that the plaintiff should attempt Anton Pillar relief or see whether other departments of the Hong Kong Government could assist.

52. I am quite satisfied that Mr. Liao has made out a sufficient case for Norwich Pharmacal relief. The items in question clearly emanate from the licensee and not the patentee itself or its agent. The importation into Hong Kong of Portuguese Zovirax is an infringement of Wellcome's United Kingdom Patent as extended to Hong Kong. If I were wrong about that I would nevertheless grant the order in relation to the drug because of the public notices to which reference has been made. I am of course much impressed with the public interest aspect. This is an important drug and it is only right that its importation into Hong Kong should be lawful and controlled so as to ensure that the drug is put on the market in the best possible condition. Mr. Lee's second affirmation shows that there is a danger of a hazard to health with regard to the unauthorised product.

53. I am satisfied that it is necessary and proper to make the order sought in relation to acyclovir/Zovirax. I am not impressed with the argument that the plaintiff should start a spate of Anton Pillar application. I am confident that if they thought that this would bear fruit it would have been done long ago. I accept that Mr. Liao has advised that Anton Pillar applications against each pharmacist would be an unrealistic approach. An investigation by the Medical and Health Department would probably founder because doctors would be unlikely to get involved. I do not think that this is a realistic prospect in all the circumstances of this matter.

54. I should add that I think Mr. Fitzpatrick put the matter too high when he submitted that there had to be a strong case made out before a Norwich Pharmacal Order could be made. The question of standard of proof had not arisen in that case save that it seemed to be their Lordship's view that it had to be reasonable to make an order in the light of the facts and the possible injustice that such an order might create.

55. I therefore propose to make an order in relation to Zovirax and generic Acyclovir. I will consider the mechanism of the order at the end of this judgment.

TRADE MARKS

56. As I have made an order based on the patent infringement relating to Zovirax, the trademark aspect of the case is irrelevant.

57. However the trademark position is relevant to the Hazeline product range to which I now turn.

58. The relevant section here is s.27(3) of the Trade Marks Ordinance, Cap, 43. The registered proprietor is the plaintiff. The subsection provides as follows:

"(3)      The right to the use of a trademark given by registration as aforesaid shall not be deemed to be infringed by the use of any such mark as aforesaid by any person -

(a)     in relation to goods connected in the course of trade with the proprietor or a registered user of the trade mark if, as to those goods or a bulk of which they form part, the proprietor or the registered user conforming to the permitted use has applied the trade mark and has not subsequently removed or obliterated it, or has at any time expressly or impliedly consented to the use of the trade mark; or

(b)     in relation to goods adapted to form part of, or to be accessory to, other goods in relation to which the trade mark has been used without infringement of the right given as aforesaid or might for the time being be so used, if the use of the mark is reasonably necessary in order to indicate that the goods are so adapted and neither the purpose nor the effect of the use of the mark is to indicate otherwise than in accordance with the fact a connexion in the course of trade between any person and the goods."

59. Before considering these defences it is as well to recall that the evidence shows that the Indonesian Hazeline has not been authorised to be imported into, exported from, sold or otherwise dealt with in Hong Kong. In relation to Hazeline, Wellcome (Indonesia) is only licensed under the Indonesian trademark to manufacture and distribute within Indonesia under the Licence Agreement. The licensee is expressly forbidden from supply outside the territory.

60. I think Mr. Liao is correct when he submits that the evidence shows quite clearly acts which constitute infringement of Wellcome H.K.'s trademark unless these infringements are saved by the operation of s.27 (3) of the Trade Marks Ordinance.

61. The trademark referred to in the subsection is clearly the Hong Kongtrademark and not the Indonesian trade mark.

62. The defence under s.27(3) is only established if the following conditions are satisfied:

(c)    the proprietor has at any time expressly or impliedly consented to the use of the Hong Kong trade mark."

63. Mr. Liao accepts that condition (a) is fulfilled.

64. As to (b), he submits that Wellcome have not applied the Hong Kong trademark to the Indonesian Hazeline. He submits that it is clear that it is the Indonesian trademark which has been applied. Further he submits that Wellcome have not applied the trademark as they have been applied by the Indonesian subsidiary. He submits that these propositions are supported by various passages in three leading judgments, namely Castrol Ltd. v. Automative Oil Supplies Ltd. [1983] RPC 315, Colgate Palmolive v. Maxwell Finance [1989] RPC 497 and Revlon Inc. v. Cripps & Lee Ltd. [1980] FSR 85. Those were cases which dealt with group or house marks unlike here where Hazeline is one of many marks owned by Wellcome.

65. As to condition (c) he submits that Wellcome has not at any time expressly or impliedly consented to the use of the Hong Kong trademark. It seems quite clear that the Indonesian subsidiary is only licensed to use the Indonesian trademark within Indonesia and further the whole of Wellcome's distribution policy is inconsistent with express or implied consent for the Indonesian subsidiary to use the Hong Kong trademark. The question of consent is one of fact.

66. Mr. Fitzpatrick submits that a trademark is a badge of origin and not a badge of control and that the courts have set their face against the use of a mark to control the market. In relation to parallel imports Mr. Fitzpatrick submits that one must consider the circumstances of the sale and not the circumstances of the import or export. On this basis he submits that the Custom & Excise Department do not facilitate the sale but.are only concerned with import or export and they do not infringe the trademark by importation.

67. Mr. Fitzpatrick based this submission on Champagne Heidseick v. Buxton [1930] 47 RPC 28. The headnote reads as follows:

"The registered proprietors of certain Trade Marks registered in respect of champagne commenced an action for infringement of the Trade Marks and for passing off. The Plaintiffs alleged that they prepared champagne differently for different countries according to.the taste of the people of the countries and that the said Trade Marks indicated wine prepared for sale in the British Isles and they contended that the wine sold by the Defendant was their own wine prepared for the continental market only, and would cause deception if sold in the British Isles, and that the Defendant knew that it was sold by the Plaintiffs subject to restrictions. The label on that wine bore the word "Brut". The Defendant denied that deception was calculated to arise, and alleged that, if it did, it would be due to the Plaintiffs' own labels; he also denied knowledge of the restrictions on the sale of the wine.

Held, that there had been no deception on the part of the Defendant; that there was no evidence to show that the wine sold by the Defendant, with the Plaintiffs' own label attached to the bottle, had deceived or was likely to deceive any reasonable purchaser; that the effect of Section 3 of the Trade Marks Act 1875 was not to make a registered Trade Mark a badge of control carrying with it the right in the owner to full control over his goods, into whosesoever hands they might come, except in so far as he might expressly or by implication have released his right of control; nor did Section 39 of the Trade Marks Act 1905, which superseded the earlier Acts, have that effect; and that the exclusive right to use a mark conferred on the registered proprietor by Section 39 of the Trade Marks Act 1905 is the right to use the mark as a trade mark, i.e., as indicating that the goods upon which it is placed are his goods and to exclude others from selling under the mark wares which are not his. The action was dismissed."

68. Clauson J. used fairly strong language to dispose of the Plaintiff's case. He characterised the plaintiff's submissions on the interpretation of s.39 of the 1905 Act as "remarkable".

69. Mr. Liao does not dispute the correctness of the decision which appears to have been taken as good law by the Court of Appeal in the Revlon case. Mr. Liao points out that in that case the French wine was produced by the plaintiff and sold in France through its French agent (not licensee). Heidseick was a case where the trademark proprietor was attempting to use its U.K. trademark to prevent the importation and sale within United Kingdom of its own goods sold in a foreign country. I also note that that case was decided under the Trade Mark Act 1905 which contained no equivalent to s.4(3)(a) of the Trade Mark Act 1938 (H.K. s.27 (3)). In essence the facts in Heidseick are strong and similar to the facts in Betts v. Wilmott.

70. I think Heidseick is distinguishable. In the case before me, the Indonesian Hazeline is not sold by Wellcome or its agent. It is manufactured and sold by an Indonesian licensee under the Indonesian trademark. I am not satisfied that they act as agents for Wellcome. It appears to me that the principal - agent relationship is very different to the licensor/licensee relationship. It does not follow that a licensee is in all cases the agent of the licensor. In my judgment the present case is distinguishable from Heidseick and it is not necessary for me to go into the other cases cited which comment on Heidseick. I am therefore satisfied that condition (b) has not been made out in this case.

71. I should add that I was not impressed with Mr. Fitzpatrick's argument in terrorem (charmingly put) that this case is of enormous commercial significance because if I find for the plaintiffs I will be sanctioning a trademark holder preventing parallel imports where there is no difference in quality but merely on the basis that there is some sort of trademark licence agreement in another jurisdiction and thus I would be attaching to a trademark a badge of control. There are two answers to assuage these fears. Firstly, I am only deciding whether or not the plaintiffs have made out a sufficient case of infringement so as to render a Norwich Pharmacal order reasonable in all the circumstances of the case. If an order is made and if the wrongdoer is found, he will not be bound by anything in this judgment. Secondly, these cases turn to a large degree on their own facts and a conclsuion in favour of the plaintiffs in this case would not automatically justify a similar order in a different factual context.

72. I now turn to consider condition (c) namely, have Wellcome at any time expressly or impliedly consented to the use of the Hong Kong trademark. The question of consent is of course one of fact. The Indonesian subsidiary is only licensed to use the Indonesian trademark and is forbidden to supply outside Indonesia. I am satisfied that, consistent with Wellcome's distribution policy which I have set out above, there has been no consent, express or implied, for the Indonesian subsidiaries to use the Hong Kong trademark. Mr. Fitzpatrick's heavy reliance.on the Revlon case fails in my judgment because of the factual differences espciall.y the element of control which the parent company could exercise upon any company in the group. In Colgate the court refused to imply consent where this would involve a misrepresentation as to quality. Although the point is not relevant to Hazeline, it would have been most relevant to Zovirax had I not been satisfied as to the Patent position but been considering it under the trademark legislation.

73. I therefore conclude that neither conditions (b) nor (c) have been made out and that accordingly the defence based on s.27 (3) has not been made out. I am therefore satisfied that the plaintiffs have made out a strong enough case of trademark infringement to justify a Norwich Pharmacal order subject to the question of administrative inconvenience to which I now turn. (I should add that had I not been satisfied as to the patent position in relation to Zovirax, I would have been prepared to make the order based upon trademark infringement).

Adminsitrative Inconvenience

74. All orders of this nature against Government departments must inevitably cause some adminsi.trative inconvenience. The plaintiffs have reduced this by limiting their request to the last 12 months. They have also offered assistance in complying with the order but this has been refused so far on the grounds of confidentiality. It seems to me that if it is otherwise reasonable to make an order, which I think it is, the amount of adminsitrative inconvenience which would warrant not making it, must be quite substantial and over and above the normal sort of inconvenience that compliance with such an order for discovery would inevitably entail. I am not satisfied that this has been established and I believe that the compensatory order that I propose to make, namely that the plaintiffs should reimburse all Government departments involved the reasonable costs in complying with this order, should be sufficient to mitigate this inconvenience. I take into account all the points raised in the evidence on this issue and all the submissions made by Mr. Fitzpatrick. Nevertheless, I am satisfied that it is reasonable to make the order especially in the light of the public interest in being able to obtain this important drug in first class condition.

Conclusion

75. Counsel were good enough to indicate that if I were prepared to grant the order sought, both sides would probably be able to come up with an agreed order therefore I propose to adjourn this matter to see whether this can be achieved. If not, I shall make what seems to me to be the appropriate order. Clearly it has to be drafted with some precision.

76. It is agreed that the defendant will have the costs of this action and further that the plaintiffs will reimburse all Government departments involved with the reasonable costs of complying with this order.

77. I am conscious of the fact that this judgment does not delve as deeply into the authorities as Counsel did. Bearing in mind the nature of these proceedings I do not think it would be of much assistance to do so. I have, however, read all the relevant authorities and the transcripts of the submissions which have helpfully been provided to me and I am quite satisfied that it is proper and reasonable to make the orders which I have indicated.

78. I would like to express my appreication to both Counsel for their considerable help in this matter and for the most pleasant way in which they presented their respective cases.