KARIBU BABY LTD v. GLOBAL YIELD INTERNATIONAL LTD t/a COUPPIE

HCA 1765/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1765 OF 2014

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REASONS FOR DECISION
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1.  This was the application of Karibu Baby Ltd (“the plaintiff”) for summary judgment in its action against Global Yield International Ltd t/a Couppie (“the defendant”).  The plaintiff’s action was for copyright and patent infringement and ancillary relief.  At the conclusion of the hearing an order in terms of the summons (with one minor amendment) was made.  My reasons appear below.

BACKGROUND

2.  The plaintiff specialises in the design, manufacture, marketing and trading of a wide variety of baby products including a foldable baby bath tub (“P’s Product”) the subject matter of the proceedings.

3.  The plaintiff is and was the owner of the copyright subsisting in the relevant design drawings (“the copyright works”) of P’s Product which was originally designed.  The plaintiff has also registered the invention in Hong Kong by way of a standard patent No HK 1171352 (“the ‘352 patent”).

4.  P’s Product was a huge market success, winning numerous awards for innovative design.  By May 2014 more than 500,000 units had been sold.

5.  The defendant is a limited company incorporated in Hong Kong and operated a website at www.couppie.com (“the website”).

6.  In May 2014 the plaintiff discovered that the defendant was marketing on its website a foldable baby bath tub (“the Infringing Product”) that was substantially similar to P’s Product, copying virtually all its design features. The plaintiff considered that the Infringing Product not only infringed its rights under the standard patent but also its copyright in the copyright works.

7.  On 24 June 2014 the plaintiff’s former solicitors issued a cease and desist letter to the defendant requesting an undertaking that the defendant would stop dealing with the Infringing Product.  The letter went unanswered and so did a reminder sent on 24 July 2014.

8.  In those circumstances, the plaintiff commenced the present action against the defendant on 10 September 2014.  The summons for summary judgment was taken out on 21 May 2015.

9.  The defendant operates an e‑commerce marketplace connecting subscribers with merchants.  The defendant operates as a middleman and online marketer.  Merchants wishing to offer their products to end customers on the defendant’s website would enter into an agreement with the defendant who would charge a commission based on the price of the product. 

10.  The merchant would provide all advertising material and the web page compiled by the defendant would be displayed for a limited promotion period during which time end customers could make online purchases.  After the promotion period, the defendant would notify the merchant the total number of items sold and the goods would be delivered by the merchant to the defendant for distribution.  After deducting its commission, the defendant would remit the balance of the total purchase price received to the merchant.

11.  The terms of the agreement between the defendant and the merchant required an undertaking from the merchant to comply with the laws of Hong Kong and an indemnity to the defendant for any legal action against it including copyright actions.

THE RELIEF SOUGHT

12.  The plaintiff seeks permanent injunctions to restrain the defendant from infringing its copyright subsisting in the copyright works and the ‘352 patent and from marketing, selling etc the Infringing Product.  It also seeks an order for delivery up, damages or alternatively an enquiry as to damages or at the plaintiff’s option an account of profits in respect of the defendant’s infringement of copyright, additional damages in accordance with section 108(2) of the Copyright Ordinance, discovery in relation to the above, and order for payment of all sums found due to the plaintiff, costs and interest.

THE APPLICABLE PRINCIPLES

13.  It is trite law that on an application for summary judgment it is incumbent on a defendant resisting the application to show a triable defence.  Its affidavit must “condescend upon particulars” and should deal specifically with the plaintiff’s claim and affidavit and state clearly and concisely what the defence is and the facts relied on to support it: Hong Kong Civil Procedure 2015 at §14/4/4.

14.  The defendant filed an affirmation made by its sales and marketing director Kwan Kwok Ching Anthea (“Madam Kwan”) dated 5 June 2015 in opposition to the application.  It was directed principally at the issue of knowledge of the ‘352 patent and the copyright works on the part of the defendant.

THE DEFENDANT’S CASE

15.  The defendant’s case has not been easy to follow because of a lack of clarity as to what was said to be a triable issue other than the issue of the defendant’s knowledge of infringement.  At various stages submissions were made that had not featured before.  Be that as it may, what can be stated at the outset is that there is no challenge to the plaintiff’s ownership and entitlement to the ‘352 patent.

16.  The defendant’s position is that in addition to there being triable issues, the plaintiff is not entitled to claim for damages and the plaintiff had failed to discharge the burden required for granting quia timet injunctions.

Patent infringement — knowledge

17.  For patent infringement, it is well established that knowledge on the part of the defendant is irrelevant.  However, Mr Poon counsel for the defendant was only prepared to accept that ‘technically’ that was the case. 

18.  When asked in what way knowledge was said to be relevant to establishing patent infringement, it transpired that Mr Poon was attempting to rely on section 81(1) of the Patents Ordinance.  That provision is relevant not to the question whether or not there had been an infringement but only when the defendant, while accepting the infringement, claims that no damages should be awarded because he was not aware and had no reasonable grounds for supposing that the patent existed.

19.  Section 81(1) had hitherto never featured in the defence.  It was not even mentioned in Mr Poon’s written submissions.  It was raised for the very first time in oral submissions.

20.  I agree with Mr Wong, counsel for the plaintiff, that it is not open to the defendant to place reliance on that provision now.  It has never been pleaded quite apart from the fact that it is incumbent on the defendant who wishes to pray in aid that provision to adduce sufficient evidence in support.  It is now far too late.

21.  On the question of patent infringement, there is no defence to the plaintiff’s claim.  It follows that the plaintiff must be entitled to summary judgment for patent infringement and ancillary relief as prayed.

Copyright infringement

22.  As regards copyright infringement, it is common ground that as this is a case of secondary infringement, the burden is on the claimant to establish a relevant infringing act committed with requisite knowledge, such knowledge being either actual or constructive.

23.  Apart from the alleged lack of knowledge, it would appear that the defendant relied on other matters.  It not only ‘questioned’ the originality and ownership of the copyright works, but also whether the Infringing Product constituted an infringing copy.  It would be convenient to address those matters first.

(i) Originality and ownership

24.  At §42 of the Kwan affirmation, one finds a throwaway line that the deponent “verily believe[s] that the design/drawing works lack sufficient originality in that they are common to all diaries and calendars in this industry”.  On that basis, she “seriously doubt[s]” that the plaintiff owns the copyright (at §43) and “disbelieve[s]” that any copyright subsists in the copyright works (at §43). 

25.  But the plaintiff could not have obtained a standard patent (the ‘352 patent) for its invention unless it had been originally designed and no similar product had existed in the market.  Assertions unsupported by particulars and evidence are counterproductive, do not assist the court and fall to be rejected.

26.  Having perused the copyright works in the pleadings and there being no evidence to the contrary, I accept the evidence at §§8‑9 of the 1^st affirmation of Yeung Yiu Fai (“Yeung 1”) affirmed on 15 April 2015.  Since the matters deposed to comply with the requirements of section 121 of the Copyright Ordinance, I am satisfied that copyright subsists in the copyright works and that the plaintiff is the owner of the copyright works.

27.  It follows that there is no triable issue on either originality or ownership.

(ii) Infringing copy

28.  Examples of P’s Product and the Infringing Product were produced in court.  The design is virtually identical.  Their similarity is blindingly obvious.  No reasonable person giving an honest answer could possibly come to the view that no substantial similarity exists between the two designs. 

29.  Further, as mentioned below, the defendant failed to exhibit drawings etc that the merchant/supplier had allegedly provided to the defendant which it could have done to establish originality.  Its failure to do so is inexplicable and readily supports the drawing of an adverse inference, for example, that the omission was not accidental either because they would not have established originality or that they did not exist: see §38 below.

30.  In the circumstances I am satisfied that the Infringing Product is a copy of P’s Product.  Therefore there is also no triable issue on copying and substantial similarity.

(iii) Infringing acts

31.  The defendant does not dispute that it had marketed the Infringing Product.  Madam Kwan’s affirmation stated (at §§20‑26) that between 2 and 25 May 2014 (“the promotional period”), the defendant had promoted or marketed the Infringing Products by placing an advertisement for them on the defendant’s website.  Customers who purchased them online during the promotional period could collect or redeem them at one of the defendant’s two collection centres, one in Causeway Bay and the other at Nathan Road between 10 June and 9 July 2014.

32.  A total of 222 Infringing Products at $198 each were ordered/sold online with the customer making online payments to the defendant. The defendant’s commission was 22% of the price paid out of which a service charge had to be paid to the online payment service provider.  The total net amount earned from marketing the Infringing Product was approximately $8,350.  The only issue is whether the defendant had actual or constructive knowledge at the relevant time.

Knowledge

33.  The defendant’s case is that it did not have the necessary knowledge at the time of infringement.  Madam Kwan deposed to the enquiries the defendant made and steps taken to satisfy itself that the Infringing Products were not infringing copies of the copyright works or the ‘352 patent. 

34.  It is stated at §§13‑14 of the Kwan affirmation that:

“13. Upon receiving such request from the Merchant, I made a telephone call to the Merchant and enquired for information including but not limited to, the source and origin of the [Infringing Products], provision of any certificate of origin, whether if it required to pass any safety test and provide such results or reports, and whether if the [Infringing Products] were subject to copyright, trade marks, patent or any intellectual property rights.

14. On 29^th April 2014, I have conducted a search on the online search system which was operated by the Intellectual Property Department [‘IPD’] in Hong Kong by using the Chinese keywords given by the Merchant in the said email dated 28^th April 2014, namely [‘可折疊嬰兒浴盤’].  The finding was negative and did not show any indication that the Merchant’s product was subject to any intellectual property rights.”

35.  Then under the “Due Diligence” heading of her affirmation she added the following points:

(a) Prior to entering into the agreement with the merchant,

(i) the defendant had no knowledge of trading in bath tubs (at §27) and that the defendant dealt mainly with cosmetics (at §5(f)) ; and

(ii) the defendant had been provided with drawings, photographs and information showing the design and packaging of the Infringing Product (at §28).

(b) The defendant used search engines “including but not limited to” internet searches. 

36.  There are glaring and inexplicable omissions from the defendant’s evidence, in particular the following:

(1) the defendant failed to exhibit any of the items mentioned in §35(a)(ii) above; and

(2) the defendant failed to relate the merchant’s responses to its detailed enquiries.

37.  The relevance of the merchant’s answers to the enquiries made is obvious.  Their omission is telling.  Either the answers were unfavourable to the defendant or the merchant did not provide any satisfactory answers.  If the latter, it would and should have alerted the defendant that something must be amiss that required further investigation. 

38.  While Mr Poon sought to suggest/speculate that the omission was an oversight, if it were a genuine omission, the defendant could have corrected that omission after reading the plaintiff’s reply affirmation dated 10 September 2015.  That it did not do.

39.  Contrary to Madam Kwan’s evidence that the defendant mainly dealt with cosmetic products, the defendant in fact dealt with a lot of household products as appears from her exhibit KKCA‑7.

40.  I turn to the searches the defendant carried out.  As regards the search made on the online search system of the IPD, the defendant has not tried to explain why it limited the search to the keywords in Chinese namely “可折疊嬰兒浴盤” (corresponding to “foldable baby bath tub”) instead of using a wider search term such as “bath tub” or “foldable bath tub” when Madam Kwan had used the term ‘bath tub’ in Chinese when searching for the merchant’s e‑mail of 28 April.  It hardly makes any sense if the purpose of the search was to ensure that no third party was holding intellectual property rights in respect of the same product.

41.  Mr Yeung’s reply affirmation shows that the wider search terms produce results that include the ‘352 patent.  (In fact there was a typographical error in Madam Kwan’s IPD search in that it did not replicate the characters used by the merchant. Instead, she used the character “盤” as part of the search term instead of the character “盆” as had appeared in the merchant’s email to her.)

42.  As regards internet searches conducted by the defendant, it was said that a search using either “foldable baby bath tub” or “foldable bath tub” would have produced many results suggesting that the object searched for was ‘commonplace’. As exhibit “YYF‑8” shows, such searches on Google would have listed P’s Product on the first page of each search.  It was then said that at that point in time the defendant was not even aware of the plaintiff’s identity.

43.  The submissions in the preceding paragraph are highly unattractive, convoluted and border on the perverse if, as appeared to be underlying theme, the large number of results would somehow relieve the searcher of any need to view any of the results shown by clicking onto them.  One might ask, rhetorically, what then is the purpose of carrying out an internet search?

44.  The extensive enquiries the defendant made and its efforts to use search engines lead to but one conclusion, namely, that it had constructive if not actual knowledge of infringement at the time it marketed the Infringing Products.  In the circumstances, I have no hesitation in rejecting the defendant’s submission that there is a triable issue as to its knowledge at the relevant time. 

CONCLUSION

45.  Accordingly, I am satisfied that there is no triable defence to the plaintiff’s claim for copyright infringement.

QUIA TIMET INJUNCTION

46.  The defendant submitted that the injunction sought should not be granted because the plaintiff has failed to discharge its burden of proving that it is reasonably certain that the defendant is intending to deal with the Infringing Product.  The defendant relied on the fact that (i) the advertisement was only displayed between 2 and 25 May 2014, (ii) upon receiving the cease and desist letter dated 24 June 2014 it had stopped distributing the Infringing Product to end customers and had returned all remaining ordered goods to the merchant and (iii) it had no intention to deal with the Infringing Product and had signed an undertaking on 17 September 2014 to stop dealing with the Infringing Product.

47.  The defendant’s intention as regards dealing could not have been more clearly stated in §46 of the Kwan affirmation:

“46. The Defendant has no intention to deal in the [Infringing Product] or the Advertisement pending resolution of the matter in dispute.” (emphasis added)

48.  The undertaking given on 17 September 2014 was given to stave off the plaintiff’s threatened application for an interim injunction.  It was not an undertaking not to infringe the plaintiff’s rights in respect of the ‘352 patent and its copyright in the copyright works in the future.  The defendant has never given such an undertaking.

49.  In the circumstances the submission made is surprising; it should never have been made.  The fact that it was advanced at all is highly regrettable. No more needs be said.

THIRD PARTY

50.  The defendant has intimated on more than one occasion that it intends to join the merchant as a third party given the indemnity contained in the agreement between the defendant and the merchant.  However, the defendant has not seen fit to put its intention into practice.  More than 10 months have elapsed since the first intimation.  Plainly that is not and cannot constitute good reason to delay entering final judgment for the plaintiff in the action.

INDEMNITY COSTS

51.  At the conclusion of the hearing, I awarded costs to the plaintiff, such costs to be on an indemnity basis after 31 May 2015.

52.  The relevant dates are the following:

(i) the writ was issued on 10 September 2014;

(ii) by letter from its solicitors dated 7 October 2014 (the terms of which reflect what the court has ordered on the summons for summary judgment) the plaintiff made an offer to settle; 

(iii) the statement of claim was served on 13 November 2014;

(iv) the first round of evidence was completed on 21 May 2015; and

(v) the call‑over hearing took place on 11 June 2015.

53.  After the first round of evidence and before the call‑over hearing, the defendant had no conceivable basis for not accepting the offer to settle.  It had no defence and must have known that there was no valid defence.  Yet, it continued to dispute the plaintiff’s rights.  The defendant’s conduct was indefensible and scandalous and wasteful of time and resources.

54.  In the circumstances indemnity costs are warranted in respect of the period occurring from a date on which the call‑over hearing should have been vacated.  On the facts of this case, I considered 31 May 2015 to be appropriate.  Accordingly it was ordered that costs incurred after that date be paid by the defendant on an indemnity basis.