昆明共願榮景企業管理咨詢有限公司 v. INVISION GLOBAL HOLDINGS LTD

DCCJ4419/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4419 OF 2015

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JUDGMENT

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Introduction

1.  The plaintiff, a limited company incorporated under the laws of the People’s Republic of China, entered into a written agreement dated 25 May 2012 (“Written Agreement”) entitled “Trainer and Translator Service Contract” with the defendant, a limited company incorporated under the laws of Hong Kong, for the provision of trainers and translators to the plaintiff for conducting seminars for a 2-year period from 1 June 2012 to 31 May 2014.  Although signed by the defendant and the plaintiff only, the preamble indicates that the trainers and translators are to be provided by four companies, including the defendant, collectively referred to as the “InVision Group”.

2.  The services provided under the Written Agreement are described in Clause 2 and 3 which read as follows –

“2. The InVision Group will provide Trainers and Translators to [the plaintiff];

3. During the Contract period, [the plaintiff] can only use Trainers and Translators of the InVision Group to conduct seminars of the InVision Group.”

3.  There is no definition of the term in the contract as to what is meant by “seminars of the InVision Group” in Clause 3, but in Clause 9 of the Written Agreement, the Trainer Fees for 13 types of seminars are listed.  Clause 4 of the Written Agreement, reproduced below, is relevant as well –

“4. The InVision Group authorizes [the plaintiff] to present the seminars of the InVision Group in Kunming.”

4.  A deposit of RMB500,000 was paid by the plaintiff to the defendant under the Written Agreement and there are provisions relating to the forfeiture of the deposit in the circumstances described therein.

5.  Another provision of the Written Agreement which forms the basis of the claims of the plaintiff is Clause 15. That clause stipulates that trainer allowance is to be provided by the defendant.  There is no dispute that, by an oral agreement (“Oral Agreement”), the plaintiff has agreed to make payments of monthly allowance to the trainers and translators on behalf of and as directed by the defendant and the defendant has agreed to reimburse such payments to the plaintiff immediately upon receipt of notices from the plaintiff.

6.  Also of interest to the issue in question are two clauses, Clauses 19 and 20, set out under the heading “Professional Ethics”.  They provide as follows:-

“19. [The plaintiff] must not solicit and employ the Trainers, Translators and staff of the InVision Group during the Contract period and after six months after the contract period.

20. [The plaintiff] must not use to the detriment or prejudice of the InVision Group or divulge to any person any trade secret or any other confidential information concerning the business or affairs of the InVision Group which may have come to the knowledge of [the plaintiff] during the Contract period.”

7.  The plaintiff commenced this action for the refund of the deposit of RMB500,000 paid by it under the Written Agreement and for the sum of RMB13,400, being allowance which the plaintiff has paid for pursuant to the Oral Agreement but which the defendant has failed to reimburse them for.

8.  In its Defence & Counterclaim (“DCC”), the defendant relies on 4 Acts of Misconduct which it says amount to a defence to the claims of the plaintiff.  As for its counterclaim, the defendant alleges that it suffered loss and damage by reason of the 4^th Act of Misconduct.

9.  The plaintiff was originally legally represented.  Shortly before the hearing, its lawyers ceased to act for it.  The plaintiff did not attend the hearing and Mr Lam asked me to dismiss its claims.  With the plaintiff not prosecuting its claims against the defendant, I dismissed the action with costs to the defendant.

10.  That leaves the counterclaim of the defendant.  It is therefore necessary to take a closer look at what the 4^th Act of Misconduct is. 

4^th Act of Misconduct

11.  The 4^th Act of Misconduct is pleaded in paragraph 3(14) to (20) of the DCC, with the particulars of loss and damage to be found in paragraph 7 of the DCC.  In essence, the complaint of the defendant is that there was an implied term in the Written Agreement that the plaintiff shall cease using the “IN” branding of the defendant upon expiry of its term, unless with the prior consent or approval of the defendant (“Branding Term”), and that since 1 June 2014 and up to the date of the DCC, the plaintiff had been in breach of this implied term.

12.  Four specific situations of alleged breach of the Branding Term have been pleaded by the defendant:-

(i)   On 7 June 2014, the plaintiff made the following public promotional speech in Kunming of Mainland China in which the “IN” branding of the defendant was used –

“我地將會將 “IN” 帶到去重慶，將“IN” 文化傳遞俾更多[慨]人，令更多城市創造不同！如果您想支持您[慨]朋友成為重慶[ 慨]“IN” ，或者您有住係重慶附近 ，歡迎您一齊去創造！我地會成立第一班創造團隊！第一班課程將會[唯]2015年7月8號正式開始，邀請大家一齊創造！”

(ii)   On 9 June 2015, the plaintiff published written version of similar words to at least 2000 people, using popular smartphone and/or computer programmes including WeChat and/or Weibo without the prior consent or approval of the defendant;

(iii)   Since 1 June 2014 and up to the date of the DCC, the plaintiff has been operating at least one “IN” class in Kunming of Mainland China every 4 weeks, using the “IN” branding in the class names and/or class materials in such classes;

(iv)   Since 8 July 2015 and up to the date of the DCC, the plaintiff has been operating at least one “IN” class in Chongqing of Mainland China every 6 weeks, again using the “IN” branding in the class names and/or class materials in such classes.

13.  The plaintiff admitted to the giving of the promotional speech in Kunming to promote “IN” concept and “IN” culture, the posting of a message on Weibo on 9 June 2015 regarding an upcoming foundation course on the “IN” concept (領航者基礎篇) in Chongqing; and that it has been operating courses involving the “IN” concept in Kunming and Chongqing. 

14.  At the hearing, Mr Lam accepted that the defendant has no evidence on any other acts of alleged breach of the Branding Term.  I am therefore only concerned with the four specific acts identified above.

15.  The plaintiff denied that there is any implied Branding Term and even if it can be implied, it is no longer binding on the plaintiff after expiry of the Written Agreement.  In particular, the plaintiff averred that the “IN” concept was not part of any of the courses provided by the defendant under the Written Agreement.

16.  It is the plaintiff’s case that the term “IN”, not being a registered trademark or a patent, is not a proprietary right of the defendant and the use of it by the plaintiff does not require the consent of the defendant.  The plaintiff alleges that “IN” is a generic term, being an abbreviation of the phrase “I am Navigating” which is a concept promoted in a self-improvement training programme known as “Integrity Network Program” by Life Dynamics, with emphasis on developing leadership qualities, belief in leadership and teamwork.  The plaintiff also claims that the “IN” concept is used by other providers of self-improvement and leadership training in their training courses.

17.  Evidence of the defendant is mainly the testimony of Dr Chris Lam, a director, the President and the CEO of the defendant.  Apart from a few questions from the court, Dr Lam basically adopted what was stated in his witness statement.  Save as mentioned in the discussions below, I am prepared to accept what Dr Lam said about the relationship between the plaintiff and the defendant.

18.  It is stated in paragraph 41 of the witness statement of Dr Lam that the “IN” branding was and remains the intellectual property of the defendant.  It is the defendant’s case that the Branding Term was an implied term because it was obvious and/or necessary to give business efficacy to the Written Agreement.

Legal principles

19.  The case of Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 was relied on by Mr Lam.  Lord Neuberger referred to three classical statements of the nature of the requirements which have to be satisfied before a term can be implied into a detailed commercial contract.  In paragraph 16 of the judgment, the following quotations from earlier cases can be found:-

“the law is raising an implication from the presumed intention of the parties with the object of giving the transaction such efficacy as both parties must have intended that at all events it should have” from The Moorcock (1889) 14 PD 64, 68;

“A term can only be implied if it is necessary in the business sense to give efficacy to the contract”; “it is such a term that it can confidently be said that if at the time the contract was being negotiated the parties had been asked what would happen in a certain event, they would both have replied: “Of course, so and so will happen; we did not trouble to say that; it is too clear” from Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592,605

“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying”; “if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course’” from Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, 227.

20.  Lord Neuberger went on to consider, in paragraph 18 of the judgment, the observations made in other cases, including the following statement of Lord Simon of Glaisdale in the case of BP Refinery (Western Port) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283 on the conditions of implying terms into a contract:-

“for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

21.  Lord Neuberger then referred to Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472 and Atkins International HA v Islamic Republic of Iran Shipping Lines (The APJ Priti) [1987] 2 Lloyd’s Rep 37 where the court added a caveat that the omission may well have been deliberate.  Having done so, Lord Neuberger observed in paragraph 21 of the judgment:-

“In my judgment, the judicial observations so far considered represent a clear, consistent and principled approach. It could be dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in the BP Refinery case 180 CLR 266, 283 as extended by Bingham MR in the Philips case [1995] EMLR 472 and exemplified in The APJ Priti [1987] 2 Lloyd’s Rep 37. First, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408,459, Lord Steyn rightly observed that the implication of a term was “not critically dependent on proof of an actual intention of the parties” when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon’s first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, para 27, although Lord Simon’s requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is “vital to formulate the question to be posed by [him] with the utmost care”, to quote from Lewison, The Interpretation of Contract 5^th ed (2011), p 300, para 6.09. Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of “absolute necessity”, not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon’s second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.”

Parties’ intention

22.  According to the Marks & Spencer case, the implication of a term is not critically dependent on proof of an actual intention of the parties when negotiating the contract but was concerned with what notional reasonable people, in the position of the parties at the time at which they had been contracting, would have agreed. Further, as pointed out in the Philips Electronique and The APJ Priti cases, the court should not lose sight of the possibility that the omission may well have been deliberate.

23.  Although drawn up by lay persons, it is notable that the Written Agreement is a fairly detailed agreement.  In particular, there is a provision, Clause 19, which is expressly stipulated to have post-termination effect, requiring the plaintiff not to solicit or employ the personnel of the defendant after termination.  Clause 20, which restrains the use of trade secret and confidential information of the defendant, although not expressly so stated, seems to be one such provision as well. 

24.  The parties did therefore address their minds to post-termination obligations and protection of intangible properties, but they did not provide for the cessation of use of intellectual property rights after termination.  This tends to support a case of the parties intending to leave the matter on intellectual property rights unaddressed.

Necessary or obvious?

25.  Mr Lam acknowledged that intellectual property rights are territorial in nature – what are protected in one jurisdiction may not be protected in another jurisdiction.  Mr Lam also confirmed, as at the date of the hearing, that the defendant had no intellectual property rights that were entitled to protection by law, whether in Hong Kong or in Mainland China.  He submitted that it was because of the lack of such protection that the parties had to resort to contractual rights to give rise to the protection.

26.  Dr Lam pointed out that the defendant did not and does not allow unrelated businesses to use the “IN” branding for free.  In support of its claims, copies of all documents within the possession, custody or power of the defendant showing the value of the “IN” branding owned by the defendant were said to be exhibited to the witness statement of Dr Lam.  That exhibit has only one document, a licensing agreement made between the defendant and a Wuhan company dated 25 October 2015 (“Licensing Agreement”).  Dr Lam testified to the use of the document as a standard for all parties who entered into a franchise arrangement with the defendant.

27.  It is apparent from the provisions of the Licensing Agreement that it is a very different agreement from the Written Agreement.  There is a definition of 授权经营体系 and of授权经营产品 (“Licensed Items”) in Article 1一(1) of the Licensing Agreement which is set out below:-

““授权经营体系”，是指甲方的授权经营体系，其包括但不限于甲方拥有的商标（包括服务商标）、商号、专利和专有技术、经营模式、著作权、培训产品、培训方法、培训系统等一切授权经营资源。

“授权经营产品”，是指带有品牌标识的所有商品及服务，包括但不限于授权服务品种、方式、模式、数据、方案、流程等。”

28.  Although reference is made to trademarks, trade names and other intellectual property rights, there is no specific indication of what these rights are and whether they are registered or unregistered rights.  When asked about the nature of such intellectual property rights, Dr Lam confirmed that none of the defendant’s intellectual property rights has been registered.

29.  The grant of the licence under the Licensing Agreement is set out in Article 2 and the relevant provisions of this Article are set out below:-

“第二条 授权经营型式

一、 甲方拥有愿景集团蜕变性及领导力培训授权经营体系，经营范围：愿景集团蜕变性及领导力培训，甲方依照本合同的约定，授予乙方使用甲方的授权经营体系，设立授权培训机构。

二、 授权经营使用内容

1、 授权经营产品的内容（培训产品或方法等课件、数据）:

探索四十学习研修

蜕变七十学习研修

诚信领袖学习研修

溯源学习研修

大师学习研修

领导力指引学习研修

女人领导力学习研修

其它课程

2、   授权经营产品使用

1)   乙方按照本合同许可的规定，仅限于在本合同有效期限内，在乙方机构内部使用，禁止复制、传播、泄露给任何第三方。

2)   如乙方未遵守本合同许可的条款，甲方可不作任何通知的情况下，有权终止授权。如此情况发生，乙方必须立即终止使用本产品全部内容并销毁所有副本，甲方如有任何损失，有权追究乙方的一切法律责任。

3、   著作权

甲方产品的著作权属于甲方，受《中华人民共和国著作权法》以及国际版权公约和其它知识产权条约的保护。”

30.  The only reference in the Licensing Agreement to the “IN” brand is in Article 4三.  Article 4 deals with licence fees, management fees and other fees, whereas the heading of Article 4三 is “Other Fees”.  Paragraph 1 of Article 4三, where the references to the “IN” brand can be found, is reproduced below:-

“1、 导师、翻译、总教及培训人员费用由乙方提前在当月初培训课程開始前预繳。

探索/蜕变导师	人民币75,000元/班
大师/领导力指引导师	人民币80,000元/班
溯源导师	人民币210,000元/班
女人领导力导师	人民币60,000元/班
其它课程导师	以甲方收费为准
课程翻译	人民币12,000元
IN第一/二周末导师	人民币25,000元
IN第三周末导师	人民币25,000元
IN周末翻译	人民币8,000元
IN总教	人民币30,000元/班
嘉宾讲座讲者	人民币5,000元/场
TI/INO主持	人民币5,000元/节   ”

31.  There are a number of express terms in the Licensing Agreement dealing with intellectual property rights. They are Article 5一1(1) and (5), Article 5一 2(2), Article 5 二2(5) and (6) and Article 8一,二 and三.  They are reproduced below –

“第五条双方的权利与义务

一、甲方的权利与义务

1、甲方的权利

1) 甲方对其授权经营体系涉及的经营模式、培训资源、著作权、商号、注册商标，及其制定的运营规范和管理制度享有法定的专有权利，受法律保护，任何个人、单位均不得侵犯。

…

5) 当甲方的著作权、商号、注册商标、运营规范、管理制度等专有权受到侵害时，乙方必须负责向甲方提供一切法律和其它形式的救济的协助。

…

2、甲方的义务

…

2) 提供授权经营授权拥有的资源、品牌标识、注册商标、商号等，指导乙方做好开业筹备工作。

…

二、乙方的权利与义务

…

2. 乙方的义务

…

5) 维护甲方及授权经营体系的名誉及统一形象，保护甲方所有的著作权、'商号、注册商标及其经营管理制度和规范不受侵犯。在发生此类现象和行为时，须及时通知并协助甲方完成法律和其它形式的追究。

6) 妥善保管与甲方授权经营业务相关的一切资料，不得将甲方的培训资源、商号、注册商标及其经营管理规范，用于与甲方授权经营业务无关的其它任何场所、行业、活动或提供给第三方。

…

第八条合同终止后续事项

一、本合同终止后，乙方应立即停止使用甲方的授权经营授权，及商标、品牌标识及其它与授权经营体系有关的任何标识。

二、乙方应在本合同终止之日起14日内返还甲方为履行本合同而提供的所有物品，包括文件及其副本或任何复制品。

三、除甲方接收外，乙方应甲方要求撤换营业地所有授权经营体系特有的内外部设计、装修、装饰、颜色配置、布周、家具、设备，或清除前述用品之上的商标、授权经营标识及其它与授权经营体系有关的任何标识。”

32.  It is notable that intellectual property rights were stated in Article 5一1(1) as entitlement of the defendant protected by law, although now conceded to be not the case.  It is also expressly provided in Article 8 that the licensee shall cease to use the licensed products and trademarks, brandings and other signs relating to the licensed products upon termination of the contract and it has to return to the defendant all articles and documents used for the performance of the contract together with all copies thereof.  The licensee is also required, if so requested by the plaintiff, to change all the interior designs, furnishings and fittings, colour scheme, settings, furniture and equipment or remove all trademarks, licensed signs or other signs used on any of the aforesaid items.

33.  Unlike the Licensing Agreement where intellectual property rights form part of the subject matter of the contract, there is no mention of intellectual property in the Written Agreement, nor any reference to the “IN” brand whatsoever.  Clause 9 of the Written Agreement sets out the rate of Trainer Fee per training for 13 types of seminars, the names of which does not include the “IN” brand.  Read as a whole, the Written Agreement relates to the provision of specific personnel for the organization of seminars in Kunming only.  

34.  Hence, despite the express authorization in Clause 4, the Written Agreement itself can be carried out or performed without the use of the “IN” brand at all.  It is thus not necessary for there to be an implied term that the plaintiff shall cease to use the “IN” branding upon termination of the Written Agreement to give business efficacy to it, nor is it so obvious that upon termination of the Written Agreement, “it goes without saying” that the plaintiff shall cease using it unless with the consent or approval of the defendant.  The proposition that the Branding Term should be implied will not pass the officious bystander test.

Reasonable and equitable?

35.  The plaintiff is on even stronger ground in respect of this requirement.  The plaintiff has specifically taken issue on the point of lack of legal protection, claiming that “IN” is free for use by all.  Although not clear previously because of the claim in paragraph 41 of the witness statement of Dr Lam that the “IN” brand was and remains the property of the defendant, there is now no dispute that the “IN” branding is not entitled to protection by law.  To imply a term as requested by the defendant would be to allow it to impose a restraint on the plaintiff through the backdoor. 

36.  It may be argued on the side of the defendant that it would not have entered into the contract with the plaintiff had they not accepted such a restraint.  That might have been what had happened in the case of the Wuhan company that entered into the Licensing Agreement with the defendant, but that company did so with their eyes wide open, the restraint being an express provision of the contract.  The Licensed Items, the subject matter of their deal, feature intellectual property rights in the main.  Acceding to the imposition of such a restraint would have been balanced against the benefits of having the right to use the Licensed Items.  Such feature is overtly missing in the Written Agreement.

37.  The defendant specifically drew my attention to an email from Herman Lau of the plaintiff dated 21 January 2013 (“21/1 email”), when it tried to respond to the complaint of the defendant relating to the 2^nd Act of Misconduct.  The 2^nd Act of Misconduct involved the promotion of plaintiff’s own fortune-telling, zodiology, tarot-card reading and Bert Hellinger classes, using the “IN” brand without the consent or approval of the defendant. 

38.  In the 21/1 email, the plaintiff apologized for having breached the contract in such terms “監於我的自以為是和不負責，造成這次破壞合約的行為，謹此致歉”and“若再次因未授權下用IN名義去做有違合約的事情，願意接受合約中的罰款條約.”  Actually there had been earlier communication on this matter, an email also from Herman Lau of the plaintiff dated 17 January 2013 (“17/1 email”), when he attempted to explain to Dr Lam what the Bert Hellinger classes were about.  The 17/1 email then went on to refer to a “昆明IN人計劃” of a third party.  Dr Lam responded by email on 17 January 2013, stating why the defendant did not consider those classes to be in line with the seminars of the defendant.

39.  The reference to the “昆明IN人計劃” of a third party in the 17/1 email shows that the plaintiff did not consider “IN” to be an intellectual property owned by a particular party.  As for the words “自以為是” in the 21/1 email, they suggest that the plaintiff thought it was not doing anything wrong, and that it had only come to realize that it had, in the eyes of the defendant, committed a breach of the contract, because of the response from Dr Lam.  Given that the question of whether a term should be implied into a contract is to be assessed with reference to the time at which the parties were contracting, these emails support a case of the plaintiff not knowing the 2^nd Act of Misconduct was, at the time of its commission, objectionable to the defendant.  They tend to undermine the notion of implication of the Branding Term into the Written Agreement.

40.  The above emails have to be considered against the status of the relationship of the parties at the relevant time as well.  The defendant had by then complained of the 1^st and 2^nd Acts of Misconduct and the contract period of the Written Agreement had not even reached its halfway point.  The apology could have been tendered for the sake of preserving the relationship of the parties, when the plaintiff was still dependent on the provision of the services by the defendant under the Written Agreement.  Such attitude of the plaintiff during the contractual period in no way suggests that it would have agreed to restrain itself from using the “IN” brand after termination of the Written Agreement.

41.  The absurdity of implying the Branding Term into the Written Agreement can be further demonstrated by considering the hypothetical scenario of a successful registration of the “IN” brand as a registered trade mark by an unrelated third party in respect of the goods and/or services of interest to the plaintiff and the defendant.  This third party will then, if its registration is not invalidated or revoked, have a better right to the “IN” brand than the defendant, and the plaintiff can obtain a licence from this third party for the use of the “IN” brand.  In fact, to ensure the activities of the plaintiff which require use of the “IN” brand to remain lawful, it would have to obtain such a licence.  Why therefore would the plaintiff agree with the defendant to the imposition of any restraint in the use of intellectual property rights over which the defendant did not have any legal entitlement, thereby unnecessarily and unduly restrict its future operation? It would not thus be reasonable or equitable for the implication of the Branding Term into the Written Agreement.

42.  Based on the above reasons, I find against the defendant in respect of its counterclaim.

Damages

43.  Although not strictly necessary in view of my above finding, I venture to say a few words about the assessment of damages.  Whilst Mr Lam accepted that there is no evidence of any breach of the Branding Term beyond the four incidents pleaded in the DCC, the evidence of Dr Lam is that he was not sure whether the alleged breach was still continuing as at January 2017, when he made the witness statement.  There is the admission of the plaintiff that they had organized courses on the “IN” concept in Kunming and Chongqing, but the frequency or actual number of such courses has not been indicated.

44.  The claim of the defendant for damages is based on the rate charged under the Licensing Agreement.  Under that agreement, the Wuhan company was charged RMB2,000,000 as 授权经营費 for a term of 5 years.  It is therefore the defendant’s case that damages should be assessed at the rate of RMB400,000 for each year’s use. 

45.  Although Dr Lam referred to that agreement as the standard used for franchises granted by the defendant, such standard practice could only have been effective after the date of the Written Agreement, as otherwise it should have been used with the deal struck with the plaintiff.  In any event, I do not find that agreement to offer great assistance when the subject matter of the license is 授权经营体系 and 授权经营产品, of which intellectual property rights form only a part.  The RMB400,000 per year rate is for the whole package and not for use of intellectual property rights only.  Even with the intellectual property rights covered by the Licensing Agreement, the “IN” brand seems to form only a small portion, since the whole host of such rights including copyright and patent have been mentioned.  Hence, the fees payable solely for the use of “IN” brand can only be a fraction of this RMB400,000 charge.

46.  Of greater importance however is the provision under Article 5 of the Licensing Agreement which stipulates the rights and liabilities of the parties.  The intellectual property rights of the defendant were stated as being entitled to protection by law in Article 5一1(1).  That forms the basis for the charging of the use of such rights by the licensee. 

47.  The position would be the same with the implication of the Branding Term in the Written Agreement. Even if I were to find that such a term should be implied, it would only have been implied on the basis of an implied undertaking or warranty by the defendant that the “IN” brand was entitled to protection by law.  That would be an inevitable corollary to give business efficacy to the contract.  Hence, any claim for breach of the implied Branding Term would be successfully defeated by a defence of breach of the aforesaid implied undertaking or warranty.  In light of the above, I would not have found the defendant to be entitled to any damages even if it there had been a breach of the implied Branding Term.

48.  The defendant’s counterclaim is dismissed with costs to the plaintiff, to be taxed if not agreed.  The costs order is made on a nisi basis, and will become absolute if neither party applies for variation within 14 days from today.