OWNDAYS CO., LTD AND ANOTHER v. PROFESSIONAL OPTOMETRIST LTD AND OTHERS

HCA 1718/2018

[2019] HKCFI 3147

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1718 OF 2018

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REASONS FOR JUDGMENT

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1.  This is the Plaintiffs’ application for summary judgment in respect of:

(i)   infringement of the 1^st Plaintiff's copyright subsisting in the certain artistic work; and

(ii)  invalidation of the 2^nd Defendant's registration of a trade mark which allegedly was registered in bad faith.

2.  In the hearing on 18 December 2019, I allowed the Plaintiffs’ application and granted summary judgment against the Defendants.  I now give my reasons.

Background

3.  The 1^st Plaintiff is a Japanese corporation incorporated in 1989 and the 2^nd Plaintiff is an affiliated Singaporean corporation of the 1^st Plaintiff.   The Plaintiffs carry on business in the manufacture and retail of eyewear in various countries in Asia under the house mark “OWNDAYS” which is the company name of the Plaintiffs.

4.  The 1^st Plaintiff is the owner of the artistic work subsisting in the design drawing of the corporate logo (“the Artistic Work”).  The Artistic Work was commissioned by the 1^st Plaintiff and created by Mr Tatsuhiro Hayashi in or about January 2007 who was at the material time a resident of and domiciled in Japan.  The Artistic Work was first published in Japan on 7 March 2007.  The Artistic Work has been used on stationery, eyewear, shop signage and other business materials of the Plaintiffs.

5.  The 2^nd Defendant is the wife of the 3^rd Defendant.  They are and were at all material times the sole directors and shareholders of Keen Brave Development Ltd (“Keen Brave”) and the 1^st Defendant.  Between 2007 and 2008, the 1^st Plaintiff placed 3 purchase orders with Keen Brave for the manufacture and supply of eyewear.  The earliest invoice issued by Keen Brave was dated 23 January 2007.

6.  Unbeknownst to the Plaintiffs and without their consent, the 2^nd Defendant, on 20 June 2007, applied to register the Artistic Work as a trade mark in respect of optical products which is the company name, house mark, brand and was the corporate logo of the Plaintiffs (“the Suit Mark”), 5 months after the 1^st Plaintiff placed its first order with Keen Brave.  The Suit Mark is an identical reproduction of the Artistic Work.  The Plaintiffs only discovered the 2^nd Defendant’s conduct when the 2^nd Plaintiff applied to register “OWNDAYS” in 2014.

7.  The 2^nd Plaintiff issued revocation proceedings against the Suit Mark for non-use, and the 2^nd Defendant filed evidence of use by the 1^st Defendant with her consent in her statutory declaration and made the following admissions:

(i)   at the time when the 2^nd Defendant applied to register the Suit Mark, the "OWNDAYS" brand was unknown in Hong Kong and the 2^nd and 3^rd Defendants had no idea whether the "OWNDAYS" brand was registered as a trademark elsewhere; and

(ii)  the 2^nd and 3^rd Defendants thought the Suit Mark was interesting and wanted to register it for their future business.

8.  Indeed, the aforesaid admissions have been repeated by the 2^nd Defendant in her affirmation filed in this application.  In such sense, the 2^nd and 3^rd Defendants have made a very clear and unequivocal admission of copying the Artistic Work of the Plaintiffs.

9.  In support of the claim for copyright infringement, the Plaintiffs rely on the disclosures made by the 2^nd Defendant in her statutory declaration, in which she stated how the 2^nd and 3^rd Defendants carried on the manufacture and sale of infringing eyewear through the 1^st Defendant.

10.  On the other hand, the application for invalidation of the registration of the Suit Mark is based on bad faith under ss 11(5) and 53(5)(b) of the Trade Marks Ordinance, Cap 559.

11.  The Defendants are not challenging the ownership and the subsistence of copyright.  It is also accepted that the Defendants had copied the Artistic Work by using it on the eyewear manufactured and sold by the 1^st Defendant.  To oppose the Plaintiffs’ claim, the defence put forward is that both the 2^nd and 3^rd Defendants held an honest belief that:

(i)    since the Suit Mark had not been used or promoted in Hong Kong, they were entitled to register the Suit Mark in Hong Kong;

(ii)   upon its registration, the Defendants were entitled to use the Suit Mark as a trade mark of their eyewear in Hong Kong; and

(iii)  they were not aware that there would be copyright issue involved for them to use the Suit Mark in Hong Kong.

12.  In the case that liability of copyright infringement is established, the liability of the 2^nd and 3^rd Defendants as joint tortfeasors is not disputed.

13.  The main issue in this case is, therefore, whether the alleged honest belief held by the 2^nd and 3^rd Defendants does provide a defence to the Plaintiffs’ claim for copyright infringement and invalidation of the registration of the Suit Mark.

Legal principles on bad faith in respect of trade mark application

14.  The English authorities on bad faith in the corresponding section of the Trade Marks Act have been reviewed and applied in Hong Kong in Wong To Yick Wood Lock Ointment Ltd v Nippon Taisun (HK) Ltd[1].  In that case, Wilson Chan J held that the respondent had copied the applicant’s marks and their commercial behaviour fell far short of the standards of acceptable commercial behaviour observed by reasonable and experienced people in the particular area being examined.[2] In the premises, the respondent’s registered trade mark was invalidated.

15.  The learned judge had succinctly summarised the legal principles on bad faith in his judgment:

“17. The seminal definition of bad faith is given by Lindsay J in Gromax Plasticulture Ltd v Don & Low Nonwoven Ltd [1999] RPC 367 at 379 line 25-33:

“I shall not attempt to define bad faith in this context. Plainly it includes dishonesty and, as I would hold, includes also some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area being examined. Parliament has wisely not attempted to explain in detail what is or is not bad faith in this context; how far a dealing must so fall-short in order to amount to bad faith is a matter best left to be adjudged not by some paraphrase by the courts (which leads to the danger of the courts then construing not the Act but the paraphrase) but by reference to the words of the Act and upon a regard to all material surrounding circumstances.”

18. G. Hobbs QC (as the Appointed Person), also said the following in Demon Ale Trade Mark [2000] RPC 345 at 356.

“These observations recognise that the expression "bad faith" has moral overtones which appear to make it possible for an application for registration to be rendered invalid under section 3(6) by behaviour which otherwise involves no breach of any duty, obligation, prohibition or requirement that is legally binding upon the applicant.”

19. It is now accepted that the test for bad faith is to apply an objective standard, namely, acceptable commercial behaviour observed by reasonable and experienced persons in the particular commercial area being examined. The tribunal should inquire as to the defendant’s state of knowledge concerning the transaction or matters in issue, and should take into account this knowledge when deciding whether the defendant conduct fell below the objective standard, with the applicant’s own view on the appropriate standard being irrelevant: see, Kerly’s Law of Trade Marks and Trade Names 16^th ed, paragraph 10-269.

20. In Red Bull GMBH v Sun Mark Ltd, Sea Air & Land Forwarding Ltd [2013] ETMR 53 at [131]-[138], Arnold J summarised the general principles concerning bad faith for the purposes of the UK equivalent of section 11 (5) of the TMO”-

“First, the relevant date for assessing whether an application to register a trade mark was made in bad faith is the application date: see Chocoladenfabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH (C-529/07) [2009] E.C.R. I-4893 at [35].

Secondly, although the relevant date is the application date, later evidence is relevant if it casts light backwards on the position as at the application date: see Hotel Cipriani Srl v Cipriani (Grosvenor Street) Ltd [2008] EWHC 3032 (Ch), [2009] R.P.C. 9 at [167] and cf. La Mer Technology Inc v Laboratoires Goemar SA (C-259/02) [2004] E.C.R. I-1159 at [31] and Alcon Inc v OHIM (C-192/03) [2004] E.C.R. I-8993 at [41].

Thirdly, a person is presumed to have acted in good faith unless the contrary is proved. An allegation of bad faith is a serious allegation which must be distinctly proved. The standard of proof is on the balance of probabilities but cogent evidence is required due to the seriousness of the allegation. It is not enough to prove facts which are also consistent with good faith: see BRÜTT Trade Marks [2007] R.P.C. 19 at [29], von Rossum v Heinrich Mack Nachf. GmbH & Co KG (R 336/207-2) OHIM Second Board of Appeal, 13 November 2007 at [22] and Funke Kunststoffe GmbH v Astral Property Pty Ltd (R 1621/2006-4) OHIM Fourth Board of Appeal, 21 December 2009 at [22].

Fourthly, bad faith includes not only dishonesty, but also “some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area being examined”: see Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd [1999] R.P.C. 367 at 379 and DAAWAT Trade Mark (C000659037/1) OHIM Cancellation Division, 28 June 2004 at [8].

Fifthly, s.3(6) of the 1994 Act, art.3(2)(d) of the Directive and art.52(1)(b) of the Regulation are intended to prevent abuse of the trade mark system: see Melly’s Trade Mark Application [2008] R.P.C. 20 at [51] and CHOOSI Trade Mark (R 633/2007-2) OHIM Second Board of Appeal, 29 February 2008 at [21]. As the case law makes clear, there are two main classes of abuse. The first concerns abuse vis-à-vis the relevant office, for example where the applicant knowingly supplies untrue or misleading information in support of his application; and the second concerns abuse vis-à-vis third parties: see Cipriani at [185].

Sixthly, in order to determine whether the applicant acted in bad faith, the tribunal must make an overall assessment, taking into account all the factors relevant to the particular case: see Lindt v Hauswirth at [37].

Seventhly, the tribunal must first ascertain what the defendant knew about the matters in question and then decide whether, in the light of that knowledge, the defendant’s conduct is dishonest (or otherwise falls short of the standards of acceptable commercial behaviour) judged by ordinary standards of honest people. The applicant’s own standards of honesty (or acceptable commercial behaviour) are irrelevant to the enquiry: see AJIT WEEKLY Trade Mark [2006] R.P.C. 25 at [35]-[41], GERSON Trade Mark (R 916/2004-1) OHIM First Board of Appeal, 4 June 2009 at [53] and Campbell v Hughes [2011] R.P.C. 21 at [36].

Eighthly, consideration must be given to the applicant’s intention. … … …”

16.  Hence, lack of honest belief and bad faith are two different concepts.  The test is whether one acted in bad faith and not whether one acted under an honest belief.  The defendant’s own standards of honesty or acceptable commercial behavior are irrelevant to the enquiry.[3]

Whether the Suit Mark was registered in bad faith?

17.  On the issue as to whether the Suit Mark was registered in bad faith, the objective facts are:

(i) The 1^st Plaintiff was a customer of Keen Brave of which the 2^nd and 3^rd Defendants are and were the only directors and shareholders.

(ii) As early as January 2007, the 1^st Plaintiff placed an order for the manufacture of eyewear bearing the Artistic Work.

(iii) It has not been challenged and no evidence has been put forward to suggest that it was not a matter of common general knowledge in the eyewear business that copyright subsisted in the design of logo and marks.  In fact, the Defendants do not dispute the ownership and subsistence of copyright in the Artistic Work.  Further, the Defendants did not deny copying the Artistic Work at all.

(iv) The 2^nd and 3^rd Defendants thought the Artistic Work, which is a property right of the 1^st Plaintiff, was interesting and wanted to register it for their business, knowing full well and with their eyes wide open that it was used as the brand or logo of the 1^st Plaintiff and is a common law trade mark of the 1^st Plaintiff.  Despite these facts, the 2^nd Defendant went ahead to apply for registration when the 1^st Plaintiff was still placing orders with Keen Brave without informing the 1^st Plaintiff.

18.  According to the Defendants, when the 2^nd Defendant applied to register the Artistic Work as a trade mark, the “OWNDAYS” brand was unknown in Hong Kong.  The 2^nd and 3^rd Defendants had no idea whether the “OWNDAYS” brand was registered as a trade mark elsewhere.  However, the fact that in June 2007, the “OWNDAYS” brand was not yet in the Hong Kong market did not give the 2^nd and 3^rd Defendants a right to register the Artistic Work as a trade mark.  If they had no idea whether the “OWNDAYS” brand was registered as a trade mark elsewhere, they should have asked the 1^st Plaintiff.  The only logical reason to explain why they did not ask is that they knew consent would not be forthcoming for them to register the Artistic Work in Hong Kong as a trade mark.

19.  As mentioned above[4], if a party has copied the trade mark, name, design  or logo of another, such commercial behaviour falls far short of the standards of acceptable commercial behaviour observed by reasonable and experienced people in the particular area being examined and the mark in suit ought to be invalidated.

20.  Further in Singer TM^[5], it was held by the Registrar of Trade Marks that, in line with the acceptable standards observed by reasonable commercial persons, it would be incumbent on a Hong Kong distributor to consult its Canadian supplier and seek its authorization on the proposal for registration of the Canadian supplier’s mark in Hong Kong. Since the Hong Kong distributor had failed to do so, its behaviour had fallen below the objective standards used by honest traders in the commercial field and the mark registered by the Hong Kong distributor was accordingly invalidated.

21.  This must be right.  As submitted by Mr Shipp, counsel for the Plaintiff, to hold otherwise would virtually mean that the court is granting “a robbers’ charter to all contract manufacturers”.

22.  Mr  Cheung, counsel for the Defendants, reminds me that bad faith is a serious allegation and should not be lightly made.[6]  Further, he refers me to authorities such asRed Bull GMBH v Sun Mark Ltd, Sea Air & Land Forwarding Ltd[7], Twinsectra Ltd v Yardley[8] and Harrison v Teton Valley Trading Co Ltd[9] with a view to establish the following propositions:

(i)   As to the standards whether someone acted dishonestly or in bad faith, that standards combine an objective and a subjective test.  It must be established that the defendant’s conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest.

(ii)  It is a combined test which involves both subject and objective considerations.

23.  As the subjective intention of bad faith was not present because of the alleged honest belief of the 2^nd and 3^rd Defendants as mentioned in §11 above, Mr Cheung submits that there is no basis to invalidate the registration of the Suit Mark.

24.  I cannot accept such argument.  As stated by Sir William Aldous in Harrison v Teton Valley Trading Co Ltd, “when considering the question of whether an application to register is made in bad faith, all the circumstances will be relevant.  However, the court must decide whether the knowledge of the applicant was such that his decision to apply for registration would be regarded as in bad faith by persons adopting proper standards.”[10]

25.  Though consideration must be given to the applicant’s intention when he filed the application for registration, Arnold J (as he then was) in Red Bull GMBH v Sun Mark Ltd, Sea Air & Land Forwarding Ltd has made it clear that the correct approach is to“first ascertain what the defendant knew about the matters in question and then decide whether, in the light of that knowledge, the defendant’s conduct is dishonest (or otherwise falls short of the standards of acceptable commercial behaviour) judged by ordinary standards of honest people. The applicant’s own standards of honesty (or acceptable commercial behaviour) are irrelevant to the enquiry”. ^[11]

26.  In the present case, it would be quite unarguable for the Defendants to say that they were not aware of the objective facts as mentioned in §17 above.  Despite their bare allegations of honest belief and ignorance of the law, they must have known that some sort of intellectual property rights associated with the Artistic Work must had existed and owned by the Plaintiffs.  Instead of seeking for clarification or consent, the 2^nd Defendant proceeded to register the Suit Mark herself.  As I have mentioned above[12], the only logical reason to explain why the Defendants did not ask is that they knew consent would not be forthcoming for them to register the Artistic Work in Hong Kong as a trade mark.  It is also clear that the purpose of the registration was to obtain a monopoly use of the Suit Mark in Hong Kong adverse to the interest of the Plaintiffs. 

27.  The Registrar in Singer TM^[13] has correctly held that, in line with the acceptable standards observed by reasonable commercial persons, it would be incumbent on a Hong Kong contract manufacturer to consult its foreign customer to seek its authorization on the proposal for registration of the foreign customer’s mark in Hong Kong.  As the Defendants had failed to do so, their behaviour fell below the objective standards used by honest traders in the commercial field.

28.  For these reasons, there is no triable issue that the 2^nd Defendant’s application to register the Suit Mark in 2007 was made in bad faith, and I therefor made an order invalidating such registration.

The remaining issues relating to the claim for copyright infringement

29.  As opposed to an order for revocation, an order invalidating the registration of a trade mark would have the effect of rendering the registration void ab initio.  As a result, the “registration” did not confer any right to the Defendants to copy the Artistic Work.

30.  In any event, the registration of a trade mark, which is a copy of another’s copyright work, does not provide the trade mark owner with a defence to a claim for copyright infringement by the owner of the copyright work.  There is simply nothing in the law which provides for such kind of defence.  At most, the trade mark owner may rely on the registration to stop other third parties from using the trade mark, but he cannot use the registration to defend a copyright infringement claim vis-à-vis the copyright owner and himself.

31.  Mr Shipp accepts that the claim for copyright infringement is subject to a 6 years’ limitation period.  Hence, the relief granted for such claim is limited to the infringing activities starting from 6 years prior to the issue of the Writ.

32.  I also accept the Plaintiffs’ submission that they are entitled to claim for additional damages for the copyright infringement.

33.  There is jurisdiction for the court to make an award of additional damages under s 108(2) of the Copyright Ordinance, Cap 528, if in view of the infringement, it appears just to do so.  The court may, having regard to all the circumstances, and in particular to the flagrancy of the infringement, award such additional damages as the justice of the case may require.

34.  In Kokkia Inc v Microgear Technology Ltd^[14], the court awarded additional damages in circumstances where the defendants designed a product for the plaintiff but then subsequently started selling copies itself.  DHCJ R Ismail SC found that the infringing activities were conducted deliberately and fragrantly.  As similar circumstances occurred in the present case, I allowed the claim for additional damages.

35.  Costs should follow the event.  Furthermore, as the Plaintiffs have done better than the offer they made in the sanctioned offer dated 18 October 2018, there is no serious dispute that the Plaintiff is entitled to costs on an indemnity basis, say 3 weeks, after the making of such offer.  I therefore so ordered.