HKSAR v. WONG PING CHEUK AND ANOTHER

HCMA176/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.176 OF 2003

(On appeal from KTCC7689 of 2002 and KTS15351 of 2002)

---------------------------

---------------------------

-----------------------

J U D G M E N T

-----------------------

1. This is an appeal against conviction by the 1st appellant and his sole proprietorship trading company, the 2nd appellant, for offences of possession of goods for trade or manufacture to which a false trade description was applied, contrary to sections 7(1)(b) and 18(1) of the Trade Descriptions Ordinance, Cap.362 ("the Ordinance").

2. The goods in question were children's sunglasses and spectacle cases to which "Snoopy" logos were applied. The appellant's were in the business of manufacturing spectacles and their accessories.

3. The prosecution case at trial was that the appellants were not authorised to attach Snoopy logos to these manufactured items. The name "Snoopy" and its associated cartoon character is a registered trademark of United Features Syndicate, Inc. in the United States and by attaching such logos without authorisation the prosecution case was, as the magistrate found, that the items gave a false impression to potential purchasers that they were approved by the trademark owner.

4. Both appellants appeal their convictions on the same two grounds :

(1) the magistrate was wrong in concluding that the appellants were not authorised to put the Snoopy trademark on their products; and

(2) the magistrate should not have concluded that the appellants had not proven they had taken all reasonable precautions or exercised due diligence in attempting to avoid the commission of the offence in the terms of section 26 of the Ordinance.

5. The facts of the case were quite simple and set out in admitted facts agreed at trial. They were :

" Customs & Excise officers searched [the 2nd appellant's] office in the afternoon of 07/05/2002. Exhibit P2, that is, 800 pieces of glasses cases bearing trade description 'SNOOPY' and P3, that is 335 pairs of glasses bearing trade description 'SNOOPY' were found inside [the 2nd appellant's] office;

Exhibit P2 and P3 were seized by Customs Officer No. 9687 on 07/05/2002;

...."

6. Only one oral witness was called for the prosecution. She was PW1, a Miss Chan Pui Ling who was the approval officer of RM Enterprises Limited, the trademark agent of United Features Syndicate in South-East Asia, whose duties were to liaise with licencees of United Features Syndicate in the region. No evidence was given by or on behalf of either appellant.

7. As a starting point, the case is somewhat unusual in that the 1st appellant's company, the 2nd appellant, was authorized on 1 January 2000 for a period of a year to manufacture Snoopy eyewear by a Singapore company named OEM International Pte Limited ("OEM").

8. OEM was in fact the Asian licencee of the Snoopy trademark. That licence had been granted to it by the trademark owner, United Features Syndicate. That state of facts is proven by two documents : firstly, a letter dated 1 January 2000 in those terms under the hands of a Mr David Lim on behalf of OEM directed to the 2nd appellant ("the authorization letter") and, secondly, by the original licence agreement between United Features Syndicate and OEM for the same period (1 January 2000 to 31 December 2000) whereby OEM was granted a licence to use the Snoopy trademark so far as the manufacture and sale of sunglasses and their packaging were concerned ("the agreement").

9. Mr Shiu for the prosecution firstly argues, as an initial matter, that no weight should be given to these two documents as they were not properly adduced in evidence before the magistrate.

10. It is true the way the documents were dealt with before the magistrate was also somewhat unusual. They had been produced and shown to Customs officers by the 1st appellant at the time he was being interviewed by them under caution concerning these matters. They were annexed to the 1st appellant's record of interview when they were produced to the Customs officers by the 1st appellant during that interview in the course of his answer to their question as to whether he had any documents to prove he had been authorized to produce the Snoopy sunglasses and spectacle cases as he claimed. So when the 1st appellant's record of interview was adduced in evidence before the magistrate by consent, these two documents, referred to therein as one five-page document, formed part of the annexures to that record of interview.

11. Mr Shiu argues now that the documents were therefore not evidence for all purposes as they had not been produced as exhibits in their own right.

12. I must say that I agree that it would have been better for the documents to have been individually produced rather than as annexures to a record of interview, but I do not think that Mr Shiu is right in saying that they were not evidence for all purposes.

13. The 1st appellant's record of interview was a mixed statement in the meaning of that term in R. v. Sharp [1988] 1 WLR 7 and R. v. Duncan [1981] 73 Cr. App. R.359. That is because the 1st appellant made admissions concerning the manufacture and possession of the items so far as his own role was concerned, and as the guiding mind of the 2nd appellant so far as his company was concerned.

14. Accordingly, as a mixed statement, the magistrate was entitled to give what weight he thought appropriate to those exculpatory parts, including the documents annexed to it and forming part of the answer given by the 1st appellant to a question asked of him by the interviewing Customs officer.

15. In my view, the documents were evidence for all purposes. That is important because, as I say, the 1st appellant elected not to give evidence and, accordingly, no evidence was called by either appellant at trial except for the production by consent of some further documents through admitted facts.

16. By those admitted facts at trial, it was also agreed that the 2nd appellant had once been authorized to manufacture Snoopy eyewear during the term 01/01/2000 to 31/12/2000 by the then licencee, OEM. Accordingly, there can have been no doubt at trial that the authorization letter and the agreement were genuine.

17. So far then as this initial matter is concerned, in my judgment, as a matter of law, the documents were evidence for all purposes, and in the context of the evidence as a whole in the case, the magistrate was entitled to give them considerable weight. That brings us to the first ground of appeal.

18. In his Statement of Findings, the magistrate apparently proceeded on the basis that the sunglasses and cases the subject of the charge may well have been manufactured during the licence period, i.e. between 1 January 2000 and 31 December 2000.

19. There is no explicit finding in that regard in the Statement of Findings but the magistrate's findings as a whole would make little sense in the absence of that underlying assumption. Further, in his oral Reasons for Verdict given at trial, the magistrate convicted the appellants after stating that in his view :

"....it does not matter whether the subject products were produced within the license period."

In the context in which that was said, the magistrate obviously proceeded on the basis that the charged items were or may have been manufactured during the period of 1 January to 31 December 2000 when the authorisation of the 2nd appellant and the licence of OEM were both current as the 1st appellant had said in his record of interview.

20. Mr Kwok for the appellants suggested there was some further support for the appellants' case that the goods had been ordered during the charged period as an invoice relating to 2,250 "Snoopy cases" dated 30 November 2000 and directed to the 2nd appellant (Exhibit D4) was adduced in evidence by way of the admitted facts.

21. That document cannot be shown to relate precisely to the charged spectacle cases and, as an OEM invoice, no explanation was given at trial as to how it could relate to the manufacture of goods by the 2nd appellant which were to be sold to OEM, other than as defence counsel suggested, the cases may have been sent to the 2nd appellant by OEM's factory so as to be completed and filled with the sunglasses made by the 2nd appellant. This, I must say, seems somewhat speculative and in my judgment the invoice was not by itself evidence which goes far in establishing the goods were made or completed by the 2nd appellant during the authorization period.

22. But in any event, even leaving aside that invoice, the magistrate's findings of fact, as I say, proceeded on the basis that the goods could have been made by the 2nd appellant for OEM during the currency of the licence and the authorization period, and the 2nd appellant (and therefore the 1st appellant) is entitled to the benefit of that finding.

23. But even then accepting the 2nd appellant was generally authorized by OEM to manufacture sunglasses and their accessories bearing a Snoopy logo at the time the subject items were in fact manufactured, matters did not stop there. The authorization letter to the 2nd appellant from OEM contained this additional stipulation :

"Any proposed use of new models, new design for products, shall be subject to prior written approval of OEM International Pte Ltd. ...."

24. The magistrate had relied on the evidence of PW1 to the effect that the designs in the charged items had never been approved by United Features Syndicate. He said in this regard :

"I found the prosecution witness honest and credible and I accepted all her evidence and attached full weight onto it. For Snoopy's products, there existed a requirement that the drawings of a new product have to be verified by the licensor before it can be manufactured by a licensee. Without such verification a product is not authorized. Any products manufactured without first satisfying this requirement were unauthorized products." (emphasis added)

25. The magistrate apparently inferred that the charged items were new designs which had never gone through the approval procedure. Even if it was open to infer in the absence of any other evidence that the products were new products, it seems to me that there are other difficulties in this reasoning.

26. PW1 had restricted her evidence to stating that it was the licencee (i.e. OEM) who was obliged to seek approval, via her agency company, from United Features Syndicate for new product designs. On the basis of her evidence, it was certainly open to the magistrate to find that OEM had never sought approval of the products from United Features Syndicate.

27. But the 2nd appellant's authorization letter, in the terms of the stipulation I have referred to, simply requires the 2nd appellant to seek approval of new products from OEM, not from anyone else and not from United Features Syndicate.

28. There was no evidence called in the case to establish, so far as the 2nd appellant's manufacture of such items was concerned on behalf of OEM, even if it could be inferred from the evidence of PW1 that they were new products, that OEM had not approved them so far as the 2nd appellant was concerned. No evidence from OEM was called in this regard or at all. Indeed, the only evidence on this matter was the 1st appellant's record of interview in which he said the items were made on OEM's orders and were still in his (and the 2nd appellant's) possession simply because he was still awaiting payment for them from OEM. The invoice (Exhibit D4) provided, perhaps, some support for this. In any event, it seems to me that there was nothing in PW1's evidence which could establish OEM had never approved these products being manufactured by the 2nd appellant.

29. Further, PW1's evidence was quite explicitly limited to the practice or, in her words, the requirement that the licencee (i.e. OEM) have products approved by United Features Syndicate. She said that without that approval the products could not be authorized. However, there is nothing in the produced licence agreement between OEM and United Features Syndicate which refers to any such prior approval being required to be given. On what basis PW1 was therefore able to say that this approval procedure was contractually or otherwise necessary for the manufacturer on behalf of the licencee, of Snoopy products to be validly authorized is unclear on the evidence in this case.

30. Given the above and taking into account that the magistrate apparently accepted that the 2nd appellant may have been or was, in terms of the authorization letter, authorized to make the charged Snoopy products by OEM as the legitimate licensee of the trademark holder, as established by the contents of the 1st appellant's record of interview and the annexed authorization letter and agreement, I do not think that PW1's evidence that OEM failed to get approval of these items can be necessarily determinative as to whether the products were properly authorized when manufactured by the 2nd appellant.

31. Even if the magistrate, in relying on PW1's evidence, properly concluded that OEM was required to have sought approval for the manufacture of these products from United Features Syndicate and failed to do so, then a further consideration would perhaps have necessarily arisen as to whether OEM was an agent of United Features Syndicate and had, in any event, so far as the position of the 2nd appellant was concerned, ostensible or apparent authority to approve or authorize the 2nd appellant to make the products.

32. These were considerations which, in my judgment, properly arise given the magistrate's findings that the products may have been made during the period of OEM's own licence and its authorization of the 2nd appellant to manufacture such products.

33. Accordingly, a finding that the products' manufacture was unauthorized based solely on PW1's evidence in this regard is unsafe in my view, and on that basis the convictions should be set aside.

34. For that reason, it is strictly unnecessary for me to deal with the second ground of appeal to the effect that the magistrate was wrong to find that the appellants had not acted with due diligence in the case in terms of the defence provided to them by section 26 of the Ordinance.

35. But there was never any suggestion OEM was not a licencee of United Features Syndicate in respect of the Snoopy trademark, and the magistrate proceeded in his reasoning on the basis that OEM had ordered the products from the 2nd appellant to whom it had given an authorization letter for the manufacture of such products.

36. The sole basis for a finding that the appellants had not established a defence of due diligence was that they had not gone further than ensuring they were dealing with the legitimate licencee of the trademark and ensured that the specific goods had gone through the internal approval process set up between United Features Syndicate and its agent, RM Enterprises Limited and the licencee.

37. The magistrate's findings in this regard was that :

".... It was incumbent upon the Appellants to ask for the proof of such an approval from the licensor of OEM International [i.e. United Features Syndicate]...."

I respectfully disagree. The appellants had apparently obtained, together with the authorization letter from OEM, a copy of the agreement between OEM and United Features Syndicate. That agreement, in its terms purported to delineate the obligations existing between OEM and United Features Syndicate. There was nothing in that agreement which would have alerted the 1st appellant (and therefore the 2nd appellant) to there being a requirement that individual products had to be approved by United Features Syndicate, even if PW1's evidence in this regard was accepted.

38. The agreement on its face is a general authorization to OEM to have manufactured specific categories of goods. The 2nd appellant through the 1st appellant was entitled, in my view, to accept its terms in that regard at face value.

39. In the particular circumstances of this case, I do not think it can be said it was incumbent upon the appellants to seek confirmation from United Features Syndicate as to their approval of the particular design. The appellants were producing specific goods at the request of the legitimate licencee of the Snoopy trademark which was apparently acting in accordance with the terms of the genuine agreement between it and the trademark owner, United Features Syndicate. There was nothing within the terms of that agreement as shown to the appellants which suggested that the agreement itself was subject to any further such approval. If there had been such a term then it may well have been that my findings in this regard would have been different.

40. The appellants knew that the agreement was genuine. They had seen the documentation in that regard. I think that was sufficient. In my judgment, the second ground of appeal would also have succeeded in any event.

41. The appeals are allowed and the appellants' convictions are set aside. I further order that the amount of the fines paid by the appellants be returned to them.