XCHRX CHAP MEI PLASTIC TOYS MANUFACTORY LTD. v. PMS INTERNATIONAL FAR EAST LTD.

HCA3297/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.3297 OF 2000

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J U D G M E N T

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Application for summary judgment

1. The plaintiff applied for summary judgment against the defendant. The orders sought are set out in paragraphs 1, 2 and 3 of the draft order namely, a permanent injunction to restrain the defendant from infringing the plaintiff's copyright in the designs of the plaintiff's toy items, delivery up of the infringing articles and discovery on oath by the defendant of its dealings with the infringing articles.

The copyright

2. The plaintiff is engaged in the business of designing, manufacturing and selling toys. The defendant is also engaged in the business of manufacturing and selling toys. The plaintiff claimed to be the owner of copyright in artistic works, namely the original drawings and prototypes relating to the designs of the following nine toys of the plaintiff :

i) helicopter;

ii) jeep;

iii) machine gun;

iv) gun case;

v) ammunition box;

vi) road sign (single board);

vii) road sign (double board);

viii) flag post and base;

ix) sandbags.

The drawings were either commissioned by the plaintiff or prepared by an employee of the plaintiff in the course of his employment with the plaintiff. The copyright in the commissioned work was assigned to the plaintiff. The prototypes were in respect of the helicopter, jeep and gun. They were commissioned by the plaintiff. The copyrights in the prototypes were also assigned to the plaintiff. These toys were sold in different packagings and in combinations with other toys as part of the plaintiff's "SOLDIER FORCE" and "POLICE FORCE" playsets. They were first sold in late 1997 and mid-1998 (in the second affirmation of Mr Lam Tak Mou of the plaintiff, it was stated that these toys were introduced in early 1998).

The infringement

3. The plaintiff contended that the defendant had infringed its copyright when the defendant exposed and offered for sale to the plaintiff's private investigator boxes of toys containing infringing articles. The acts complained of took place on 26 November 1999 and 2 December 1999 respectively at the defendant's premises when the defendant provided to the plaintiff's investigator two military playsets entitled "COMBAT KING" and also "ARMY HEROES FORCE PEACE KEEPERS". These playsets contained toys ("the infringing toys") copied from the plaintiff's drawings and prototype of the toys. On 2 December 1999, the defendant also provided to the plaintiff's private investigator its catalogue featuring photographs of the infringing toys entitled "COMBAT KING". The defendant also provided a price list for the infringing toys to the plaintiff's investigator on 21 December 1999. The plaintiff also alleged that the defendant had imported infringing toys into Hong Kong.

Copyright Ordinance

4. The acts complained of by the plaintiff are obviously prohibited by section 30 and section 31(b) and (c) of the Copyright Ordinance, Cap.528 ("the Ordinance") which provide that :

"30. The copyright in a work is infringed by a person who, without the licence of the copyright owner, imports into Hong Kong or exports from Hong Kong, otherwise than for his private and domestic use, a copy of the work which is, and which he knows or has reason to believe to be, an infringing copy of the work."

"31. The copyright in a work is infringed by a person who, without the licence of the copyright owner-

(a) .......

(b) sells or lets for hire, or offers or exposes for sale or hire;

(c) for the purpose of trade or business, exhibits in public or distributes; or

(d) .......

a copy of a work which is, and which he knows or has reason to believe to be, an infringing copy of the work."

Ownership of the copyright

5. Section 121(1) and (3) of the Ordinance provide that an affidavit made by the owner of the copyright containing details of the copyright shall be presumed by the court, in the absence of contrary evidence, that the statements made in the affidavit are true. The plaintiff had provided the necessary affidavit. If the drawings and the prototypes were commissioned by the plaintiff who received the assignment of the copyright in the drawings and prototypes, then obviously the plaintiff is the owner of the copyright. Likewise, the copyright existing in the drawings prepared by the plaintiff's employee in the course of his employment is vested with the plaintiff as well. The real issue in dispute is whether copyright exists in these drawings and prototypes. In order to establish copyright exists in these works, the plaintiff has to show that the artistic works are original, in other words, they are not copied from other works : L.A. Gear Inc. v. Hi-Tec Sports Plc. [1992] FSR 121 at 125-126.

No triable issue on originality

6. The defendant stated that it obtained the toys from one of its regular suppliers in Zhun Shan, Mainland China, namely O Mai Toys Factory ("O Mai"). O Mai arranged for samples of the toys to be sent to the defendant's showroom in Hong Kong and a small quantity to be shipped directly from the Mainland to the defendant's related company in England. O Mai arranged for the import of the samples into Hong Kong. When the defendant dealt with O Mai, it had made enquiries to satisfy itself that O Mai had the intellectual property rights to produce the toys. The owner of O Mai confirmed that they had such right and informed the defendant that they had been producing some of these items and selling them to the public in the Mainland for some time.

7. The defendant denied that its toys were reproductions of the plaintiff's toys and stated that they were designed by employees of O Mai. It produced the design drawings of the infringing toys from O Mai. The defendant said that the drawings showed that they were created by several designers of O Mai on various dates in July/August 1997 before the plaintiff's drawings came into existence.

8. In my view, the defendant had failed to raise triable issues by credible evidence that the plaintiff's works are not original artistic works. The drawings provided by the defendant revealed that they are bare sketches showing the profile of the toys without any detail. The toys produced by the plaintiff and those of the defendant's are not rough toys. They are small, but each toy contained some detailed parts on their body. It is plain that the defendant's toys cannot be produced based on the so-called design drawings of O Mai. What is more revealing is that the profiles of the toys in the defendant's drawings correspond with the profiles of the toys of the plaintiff but not that of the defendant. If the defendant's toys were indeed made from the drawings of O Mai, then one would expect them to correspond with these drawings. This is not the case here.

9. In my view, the defendant has not raised any triable issue on the originality of the artistic works of the plaintiff. There is no contrary evidence on the plaintiff's claim for ownership of the copyright.

Substantial similarity

10. In Leco Instruments (UK) Ltd v. Land Pyrometers Ltd [1982] RPC 133, Fox LJ held that it is necessary to be certain that one is comparing like with like, the comparison of a sectioned drawing with a non-sectioned object may be of doubtful validity and the onus is upon the plaintiffs to establish a case for summary judgment. On the question whether there has been a reproduction of a substantial part of the drawings, he held that the issue is concerned with quality and not quantity; quality is a matter of degree, to be determined on all the admissible facts.

11. A comparison of the defendant's toys with the plaintiff's drawings, prototypes and the plaintiff's toys show a striking similarity. While certain details may vary, one can immediately see their substantial similarity. The articles in question are not some sophisticated instruments which would render the task of a visual comparison impossible. The articles in this case are toys. The similarities are present in their overall configuration. In my view, the defendant's toys are clearly infringing copies of the plaintiff's works.

Knowledge of infringement

12. In secondary infringement of copyright, the plaintiff has to show that the defendant knows, or has reason to believe that the work it dealt with is an infringing copy of the copyright work. The defendant denied such knowledge. It was accepted by the defendant that the plaintiff was a manufacturer of toys and this was known to the defendant. The defendant used to purchase products from the plaintiff about five to six years ago, however, the relationship had since stopped. The reason why the defendant stopped doing business with the plaintiff was because the plaintiff's products were too expensive and the defendant sourced its products elsewhere. This led to bad feelings between the parties. The defendant's staff did not visit the plaintiff's showroom; it did not have the plaintiff's catalogue; and the plaintiff would not even allow representatives of the defendant to visit the plaintiff's exhibit in trade fairs.

13. The plaintiff argued that its products were well known both in Hong Kong and internationally; the boxes of its toys contained notice of their copyright; the plaintiff had publicized its toys in trade magazines, trade catalogues and leaflets; it exhibited its products and the toys in this action in trade fairs and samples were also provided to overseas customers.

14. In my view, for the purpose of the Order 14 application, the plaintiff does not need to show that the defendant must have knowledge of its products and the copyright thereof before the present action was brought. In this case, the letter before action was issued by the plaintiff on 5 January 2000; the writ was issued on 28 March 2000; the Statement of Claim was issued a few days later, on 31 March 2000. In my view, by the beginning of this year, after the plaintiff had taken steps in this matter, the defendant must have knowledge that copyright existed in the plaintiff's works. In L.A. Gear, Staughton LJ held that :

"Even if the defendant had not had the knowledge required by section 23 when the writ was issued on 9 October 1989, I do not consider that this would necessarily have been an answer to the claim for an injunction. By that date the defendant had demonstrated an intention to deal in shoes which did, in fact, constitute a secondary infringement. If in the course of proceedings the defendant had acquired the relevant knowledge and had the opportunity to digest it, but still was not disposed to admit that plaintiff's right, in my opinion an injunction might well have been justified. Other remedies, however, such as delivery up or destruction, would not have been appropriate."

Nourse LJ also held that :

"...I think it very clear that by 9 October at the latest the defendant had knowledge of facts from which a reasonable man would have believed that its shoe was an infringing copy of drawing 1. The key event was the defendant's receipt of the letter of 18 September. There was plenty of time between then and 9 October for the facts to be evaluated and converted into a reasonable belief. Since the test is an objective one, there is no possibility of this issue being decided in favour of the defendant at a trial."

This approach was followed in Linpac Mouldings Limited v. Eagleton Direct Export Limited [1994] FSR 945 where Hirst LJ held that :

"...In my judgment the defendants' conduct, after the writ was issued, in relation to these proceedings, which Dillon L.J. has already described, was quite sufficient to signify an intention to continue infringement after they had reason to believe that their cups were infringing copies justifying the plaintiffs' claim for a quia timet injunction."

See also Yuen Chuk trading as New Wang Kong Co. v. Muhammad Farooq & Others trading as Osama International Company, [1999] 3 HKC 692, in which I followed the approach in L.A. Gear.

15. The defendant obviously had enough time to evaluate the claim of the plaintiff and convert them into a reasonable belief, nonetheless, it is still not disposed to admit the plaintiff's claim. The defendant had clearly demonstrated that it intended to continue to deal with the infringing toys. It had only undertaken to the plaintiff not to deal with the infringing toys during the present litigation. In my view, there is no possibility of the issue of knowledge being decided in favour of the defendant at the trial. An injunction and other relief ought to be granted subject to the matter I shall now deal with.

Previous action

16. The plaintiff had, prior to the commencement of this action, commenced another action against the defendant based on the same act of infringement. The cause of action was based on infringement of the plaintiff's registered design in respect of the helicopter and the jeep. The defendant had submitted to judgment. The orders obtained by consent were -

(i) an injunction to restrain the defendant from infringing the plaintiff's exclusive rights in the two registered designs;

(ii) delivery up of infringing articles;

(iii) disclosure on oath of the defendant's dealings with the infringing toys;

(vi) account of profits made by the defendant in infringing the plaintiff's rights in the registered designs.

17. In the present action, the plaintiff had initially pursued a monetary claim for account for profit or alternatively damages. In response, the defendant argued that it was an abuse of process for the plaintiff to seek an account of profits in this action in respect of the helicopter and jeep when it had already obtained such an order in the previous action. Reliance was made of the principle of issue estoppel set out in Henderson v. Henderson (1843) 3 Hare 100 and adopted in the modern authority of Yat Tung Co. v. Dao Heng Bank [1975] AC 581.

18. Mr Ling, counsel for the plaintiff, later abandoned this claim. Hence there is no question of any abuse of process on this issue. However, Mr Beresford, counsel for the defendant, further submitted that it is an abuse of process to apply for an injunction again in respect of the helicopter and jeep. Relying on Yat Tung (at 590), it was submitted that it is an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings.

19. In my view, as far as the helicopter and the jeep are concerned, for the purpose of summary judgment, it is an arguable issue that it is abuse of process to raise in this action the cause of action based on copyright which could and should have been litigated in the earlier action. As such, I am not prepared to grant any relief to the plaintiff in respect of these two toys.

Conclusion

20. In respect of the seven remaining toys, I will grant the relief sought by the plaintiff in terms of paragraphs 1, 2 and 3 of the draft order. In respect of the plaintiff's claim on the helicopter and the jeep, leave will be granted to the defendant to defend the claim.

Costs

21. Since the plaintiff only succeeded in part of its claim, it would not be appropriate to make an order for costs of the action (see para.14/7/11 of the Supreme Court Practice 1999). But as the plaintiff had succeeded in a substantial part of its claim, it is entitled to two-third of the costs of and occasioned by the Order 14 application in any event. As for the remaining one-third of the costs of and occasioned by the Order 14 application, it should be in the cause of the action.