DELTECH HOLDINGS LTD v. KEYTECH INDUSTRIES LTD

HCA 1969/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1969 OF 2003

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J U D G M E N T

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1. The plaintiff's claim in this action is for infringement of registered design no. 031044.8M002 registered under the Registered Designs Ordinance, Cap. 522 on 21 March 2003. This is in respect of calculators which have been referred to carabiner calculators. There is also a claim in the alternative for infringement of copyright in design drawings of the carabiner calculators made in or about December 2002 as particularized in the statement of claim.

2. The defendant filed and served its defence and counterclaim dated 23 June 2003. By its counterclaim the defendant alleges that the plaintiff has infringed the defendant's copyright. It is the defendant's case that it has been the owner of the copyright subsisting in the original artistic works relating to the defendant's carabiner calculator as particularized in para. 9 of the defence and counterclaim. It is also averred that the defendant's copyright works were first published in Hong Kong in or about February 2003 when the defendant's carabiner calculator was offered for sale to the public. It is also pleaded by the defendant that the defendant's calculators have been advertised in the February 2003 issue of the trade magazine Hong Kong Products and on websites and that it has marketed its calculators prior to the plaintiff's registration of its registered design.

3. The defendant counterclaims for an order that the register of designs be rectified by the revocation of the plaintiff's registered design. The defendant also counterclaims, inter alia, for an injunction to restrain the plaintiff from infringing the defendant's copyright works in relation to the defendant's calculators and for damages and ancillary relief.

4. By its summons dated 30 June 2003 the defendant applied for summary judgment against the plaintiff under O.14, r.1 for an order that the register of designs be rectified by the revocation therefrom of the plaintiff's said registered design. It further seeks an order under O.18, r.19 of the Rules of High Court that upon revocation of the registered design the plaintiff's claim herein against the defendant for infringement of registered design be struck out on the grounds that :

(a) it discloses no reasonable cause of action; or

(b) it is scandalous, frivolous or vexatious; or

(c) it is otherwise an abuse of the process of the court.

5. It is to be observed that there is no application for summary judgment in respect of the defendant's counterclaim for infringement of copyright in the defendant's copyright works. The application is only in respect of the defendant's counterclaim for an order that the register of designs be rectified by the revocation therefrom of the plaintiff's said registered design. It is accepted that there is a triable issue as to whether the plaintiff has infringed the defendant's copyright in the defendant's copyright works.

6. The reason why it is said that the register of designs should be rectified as aforesaid is because it is asserted, inter alia, that the plaintiff's said registered design was not new at the date of application for registration. The particulars of objections to the validity of the plaintiff's registered design dated 23 June 2003 set out the defendant's allegations. The defendant relies on the publication in about October 2002 by the plaintiff to several vendors of the drawings of the plaintiff's carabiner calculators. The defendant also relies on the publication in about February 2003 by the advertising by the defendant of the defendant's calculators in the said trade magazine and in websites as particularized. The defendant also relies on the marketing of its calculators prior to the date of application for registration of the plaintiff's registered design. Hence it is asserted that the registered design was not new at the date of registration.

7. The evidence filed on behalf of the defendant shows that the defendant's carabiner calculators first appeared in the market in or about February 2003 when it was advertised in the said trade magazine Hong Kong Products. It was also in February 2003 that the defendant marketed and promoted its calculators.

8. In this case there is no dispute that the defendant's calculators are not substantially different from the plaintiff's registered design. However, unless the plaintiff can raise triable issues to the counterclaim for an order that the register of designs be invalidated for the reasons as particularized in the particulars of objections, the defendant would be entitled to judgment for an order that the register of designs be rectified as claimed.

9. The plaintiff relies on the following defences :

(1)	that the plaintiff's drawings of its carabiner calculators were shown to six prospective vendors or manufacturers in circumstances of confidence whereby they were fully aware and understood that they were not free in law and equity to use or disclose the same; and
(2)	that the defendant's disclosure and publication of the defendant's carabiner calculators in about February 2003 was in breach of good faith.

10. On the first defence, it is plain that if the disclosure of the registered design involves anything in the nature of commercial dealing then prima facie it will not be considered as confidential and will amount to publication (para. 3.125 Russell-Clarke on Industrial Designs (6th Ed.)).

11. However, the plaintiff's case is that the plaintiff's drawings were shown to six prospective vendors or manufacturers in circumstances of confidence. This is pleaded in para. 4(c) of the reply and defence to counterclaim. Also, in para. 13 of the 3rd affirmation of Mr. Kenneth Robert Boilen ("Mr. Boilen") of the plaintiff, he said as follows :

“ As regards paragraph 1(a) of the Particulars of Objections to the Validity of the Plaintiff's Registered Design referred to in paragraph 3 of Tsoi's 2nd Affirmation I would most strongly refute and deny the aforesaid Mr. Tsoi's suggestion that the supply of the Drawings by the Plaintiff to several vendors amounted to publication of the design contained in the Drawings. In the process of selecting a suitable vendor of the Plaintiff's Carabiner Calculator I on behalf of the Plaintiff chose six prospective vendors with whom I was familiar and had worked together and co-operated in business for some time. None of them were amateurs in the trade. They knew how the Plaintiff and I functioned and I knew their style of operation. They were fully aware that any of the Plaintiff's concept drawings of products shown or given to them would be received by them in confidence and would be protected by a range of intellectual property rights in favour of the Plaintiff. I would not tolerate any disclosure of any such concept drawings by them to any third party without my prior consent and knowledge. There was no and could not have been prior publication of the Drawings by reason of the process of my selection of a vendor for the Plaintiff's Carabiner Calculator."

Mr. Boilen then described his relationship with Kai Lam Industrial Co. Ltd. who was eventually given the contract to manufacture the plaintiff's calculators.

12. It is accepted by Mr. Vaughan that there is no direct documentary evidence to the effect that the drawings were shown in circumstances of confidence by the plaintiff to the said vendors or manufacturers. However, on the evidence of the plaintiff which is supported by at least two of the vendors or manufacturers namely, Mr. Cliff Lam of Kai Lam Industrial Co. Ltd. and Mr. Chan Hon Ming of Unicorn Manufacturing Ltd., there is some evidence that the vendors and manufacturers subjectively understood and accepted that by receiving the drawings from the plaintiff an obligation of confidence was being imposed on them. In Carflow Products (UK) Limited v. Linwood Securities (Birmingham) Limited & Ors. [1996] FSR 424, it was held that there were two possible approaches in law to the question of whether a disclosure was in confidence : subjective, i.e. what did the parties themselves think they were doing by way of imposing or accepting obligations and objective, i.e. what would a reasonable man think they were doing. It was held that as equity looked at the conscience of the individual, the subjective view was the appropriate one with regard to the question of the equitable obligation of confidence.

13. The tooling agreement and the purchase order referred to by Mr. Vaughan provides some support for the understanding of the parties involved that the drawings that were sent to them were imposed with an obligation of confidence notwithstanding the fact that there is no direct documentary evidence to this effect.

14. Mr. Wong, for the defendant, submitted that the defence put forward is incredible and unbelievable. I disagree. The evidence filed does tend to support the plaintiff's assertions. It seems to me that the plaintiff's assertions are believable. Whether or not they will be believed is a matter for the trial judge. The plaintiff has shown a triable issue on the first defence raised.

15. On the second defence, the plaintiff's case as pleaded in para. 4(a) of the reply and defence to counterclaim is that it was impossible for the plaintiff's carabiner calculator and the defendant's carabiner calculator (model KT511) to have been independently designed and developed to such exacting detail without one having been copied from the other. It is also pleaded that the Court will be invited to draw an inference to the same effect at trial.

16. Mr. Boilen also in his 3rd affirmation said this in para. 7 :

“ In my professional judgment it is mathematically impossible for two calculators, namely, the Plaintiff's Carabiner Calculator (whose design is the Registered Design) ("Plaintiff's Carabiner Calculator") and the Defendant's Model No. KT511 ("Defendant's KT511") calculator to have been independently developed to such exacting detail. The exacting details of the mechanical implementation in respect of the two calculators are so much similar as to defy belief."

17. That being so, Mr. Vaughan submitted that if the defendant is found at trial not to have independently created its design for the calculator, there is a strong inference that the defendant did obtain copies of the plaintiff's drawings in circumstances of bad faith. If that were the case then the advertising and marketing of their products in February 2003 would have been in circumstances of bad faith.

18. It seems to me that as there is already a triable issue as to whether the plaintiff infringed the defendant's copyright in the defendant's drawings, the court will have to go into the whole question at trial as to whether it is the plaintiff who has been infringing the defendant's copyright in drawings or whether it is the defendant who has been infringing the plaintiff's copyright in its drawings. This depends on the credibility of witnesses on both sides and is a matter that can only be resolved at trial. I accept Mr. Vaughan's submissions that if the court were to find at trial that the defendant was in fact the party in the wrong and did not independently design its drawings then an inference can be drawn that the defendant did not advertise and market its calculator in February 2003 in good faith. It seems to me that a triable issue on the second defence has also been shown.

19. In the circumstances I give unconditional leave to the plaintiff to defence the counterclaim for an order that the register of designs be rectified.