RE CREATIVE RESOURCES LLC

CACV 15/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 15 OF 2009

(ON APPEAL FROM HCMP NO. 1607 OF 2008)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a judgment of Reyes J given on 9 January 2009. The judge allowed an appeal from a refusal of the applicant’s application to register the trade mark “NAKED” in class 10 of the register in respect of “condoms”. At the conclusion of the hearing of this appeal, this court allowed the appeal and upheld the decision of the hearing officer in refusing the application on the basis that registration was precluded under sections 11(1)(b) and 11(1)(c) of the Trade Marks Ordinance, Cap. 559, with reasons to be given in writing.

2.  In her written decision the hearing officer considered, first, the provisions of section 11(1)(c) and came to the conclusion that the mark consisted exclusively of a sign which may serve in trade or business to designate the characteristics of condoms. In reaching that conclusion the hearing officer had regard to various decisions of the European Court of Justice. In particular the hearing officer referred to the opinion of Advocate General Jacobs in Case C-191/01 P OHIM [Office for Harmonization in the Internal Market] v WM Wrigley Jr. Company (DOUBLEMINT) [2004] RPC 18 and in particular to the threefold test which he propounded at paragraphs A 62-A 64 on page 339. However, the hearing officer then went on to say in paragraph 13:

“I also note that the ECJ in the DOUBLEMINT case did not adopt those three factors in its decision.  Moreover, the ECJ in the Koninklijke KPN Nedreland NV v. Benelux Merkenbureau (POSTKANTOOR) [2005] 3 WLR 649 case stated (at paragraph 102) that for the purpose of determining whether the grounds for refusal set out in Art. 3(1)(c) of the Directive (broadly similar to section 11(1)(c) of the Ordinance) applies to a mark, it is irrelevant whether the characteristics of the goods or services which may be the subject of the description are commercially essential or merely ancillary.  This is to be contrasted with factor (iii) referred to in paragraph 11 above.  In determining whether the subject Mark designates a characteristic of the applied for goods, therefore, I do not consider myself bound to approach the issue by reference to the three factors referred to in paragraph 11 above.”

3.  The hearing officer then went on to consider the objection under section 11(1)(b). She came to the conclusion

“24……that consumers would perceive the subject Mark as nothing more than describing a characteristic of the applied for goods, as opposed to denoting trade origin.

………..

25…….The subject Mark fails to perform the essential functions of a trademark in guaranteeing the identity of the origin by enabling the relevant consumers, without any possibility of confusion to distinguish the applicant's goods from those of the others.”

4.  In the court below, the judge cited extensively from the opinion of Advocate General Jacobs in the DOUBLEMINT case and said that he regarded that as providing a “practical, non-exhaustive guideline for assessing whether a term is descriptive or suggestive of an attribute”. The judge did not refer to the fact that the threefold test was not taken up in the judgment of the court, nor to the observations of the hearing officer in relation to the POSTKANTOOR case. Instead the judge applied his own views. He considered that the term “naked” bore no direct objective relation to a condom, nor did he consider that there was any immediately discernible link between “nakedness” and the characteristics of a condom. He also said that he concluded that the characteristics of a condom supposedly designated by the word “naked” would be otherwise than arbitrary or subjective.

5.  The judge considered that it followed from his decision in respect of section 11(1)(c) that registration did also not contravene section 11(1)(b).

This appeal

6.  On this appeal Mr Yan SC, who appeared on behalf of the Registrar, submitted that the judge had erred in seeking to apply rigidly the three criteria of the opinion of the Advocate General and in failing to have regard to the decisions of the European Court of Justice, particularly the DOUBLEMINT case, in the light of which he submitted that the hearing officer had correctly approached the matter. He also submitted that the judge should have given more weight to the views of the hearing officer in respect of matters relating to registrability. It was also argued that the decision in respect of section 11(1)(c) was not determinative of the question which might arise under section 11(1)(b).

Section 11(1)(b)

7.  Although both the hearing officer and the judge started their consideration with section 11(1)(c), I prefer first to consider the position under section 11(1)(b). The prohibition in that sub-section is against registering “trade marks which are devoid of any distinctive character”. This has to be considered in the context of the definition of a trade mark. Under section 3(1) of the Ordinance:

“ “trade mark” (商標) means any sign which is capable of distinguishing the goods or services of one undertaking from those of other undertakings and which is capable of being represented graphically.”

8.  As the hearing officer said the function of a trade mark is to show the identity of the origin of the goods. The hearing officer cited from the judgment of Jacob J, as he then was, in British Sugar Plc v James Robertson and Sons Ltd [1996] R.P.C. 281 at 306, where he put it in his customary direct way:

“Is it the sort of word (or other sign) which cannot do the job of distinguishing without first educating the public that it is a trade mark?”

9.  The hearing officer referred to the obvious fact that the relevant customers in the present case were members of the general public. She said that when they came across the mark “NAKED” ordinary members of the general public would be likely to perceive that mark as a description of the naked feeling or sensation that would be experienced by users of condoms. She went on to say:

“To my mind, the consumers would perceive the subject mark as nothing more than describing a characteristic of the applied for goods, as opposed to denoting trade origin.  The subject mark is the sort of signs that is origin neutral rather than origin specific.  Without first being educated that the subject mark is a trade mark, the relevant consumers are unlikely to rely on the subject mark as a badge of trade origin for identifying the applied for goods as originating from a particular undertaking.”

10.  As a result, she reached the conclusion that the mark was equally apt for use by other traders to describe similar goods and that it failed to perform the essential function of a trade mark in guaranteeing the identity of the origin.

11.  It is appropriate, at this stage, to say something about the discretion of the Registrar. It has long been recognised that the Registrar has considerable experience in relation to matters such as distinctiveness and as to whether marks are appropriate for registration. Warrington LJ in the Court of Appeal in Garrett’s Application [1916] 1 Ch.436 gave a useful exposition of how and when the Registrar would exercise the discretion. He said at page 451:

“The applicant contends that, if a mark is found to be registrable and is not open to any of the objections referred to above, the Registrar has no longer any discretion.  To accede to this argument would, I think, be to hold that the Registrar has no discretion, because in determining whether a mark is registrable and whether it is open or not to any statutory objections the Registrar is exercising the function of adjudication and is not exercising the discretion.  That he has a right to exercise discretion as distinct from the function of adjudication is, I think, apparent on the words of the statute and is clearly settled by authority.”

12.  That discretion as to whether to register a trade mark is a judicial one. It cannot be exercised capriciously or unreasonably. In this respect I would refer to Lord Herschell’s judgment in Eno v Dunn 15 App. Cas. 252.

13.  Prior to the Trade Marks Act, 1919, it was held that on appeal from the Registrar, the court would not overrule the exercise of the Registrar’s discretion, unless he had misdirected himself, or that he had proceeded on a wrong principle, or that the court was clearly of the opinion that the discretion had been wrongly exercised. In other words, on an appeal the matter was treated in a similar way to any other exercise of discretion. Section 8(2) of the Trade Marks Act 1919 introduced an express provision as to the exercise of discretion by the court on appeal from the Registrar that was as follows:

“In any appeal from a decision of the Registrar to the Court under this Act, the Court shall have and exercise the same discretionary powers as under this Act are conferred upon the Registrar.”

14.  The extent to which the court thereafter was influenced by an exercise of discretion by the Registrar was considered in the Matter of an Application by F.Reddaway & Co.Ltd to Register a Trade Mark 44 R.P.C. 27 were Viscount Dunedin said at page 36:

“Now, it is true that an appeal lies from the decision of the Registrar, but, in my opinion, unless he has gone clearly wrong, his decision ought not to be interfered with.  The reason for that is that it seems to me that to settle whether a trademark is distinctive or not-and that is the criterion laid down by the Statute-is a practical question, and a question that can only be settled by considering the whole of the circumstances of the case.  …..

The cause of my disagreement with the Court of Appeal lies (1) in the fact that they do not look at the question from what I think was the right point of view, i.e., whether the Registrar had really gone wrong as to make it necessary to interfere with his discretion, …..”

15.  Despite the fact that the House of Lords was considering the matter only a few years after the enactment of the Trade Marks Act 1919, which was a short Act supplementing the Trade Marks Act 1905, Lord Diplock (who, a few years later, had gone out of his way to stress the limited function of an appellate court in an appeal involving the exercise by a judge of his discretion: see for example Hadmor Productions v Hamilton [1983] A.C. 191 at 220 and Garden Cottage Foods Ltd v Milk Marketing Board [1984] A.C. 130), nevertheless chose to say in his speech in the case of Smith, Kline and French Laboratories Ltd v Stirling-Winthrop Group Ltd [1976] R.P.C. 511 at 539:

“As was held by this House in the second Reddaway case the Trade Marks Acts leave to the registrar a residue of discretion as to whether a particular trade mark should be registered, but by section 52 of the Act of 1938 on an appeal from a decision of the Registrar, the judge has the same discretion as the registrar.  On matters such as this an appellate court would not in any event lightly interfere with the exercise by the judge of the discretion expressly conferred upon him by the statute; but in the instant case for the reasons that I have given I have no doubt that Graham, J.’s decision was right.”

16.  Section 52 of the Trade Marks Act 1938 was in identical terms to section 8(2) of the Trade Marks Act 1919 which was in force when Viscount Dunedin gave his speech in the Reddaway case. With the greatest respect to Lord Diplock’s undoubted eminence, I would not be so bold as to consider that Viscount Dunedin had overlooked the comparatively short 1919 Act that had been passed 7 years earlier. In so far as Viscount Dunedin had been considering the powers of the Court of Appeal, they were contained in section 27(2) of the Supreme Court of Judicature (Consolidation) Act 1925 which provided that:

“…for all purposes of and incidental to the hearing and determination of any appeal,…the Court of Appeal shall have all the power, authority and jurisdiction of the High Court.”

17.  Whilst Lord Diplock’s statement could be said to be an example of where a court is predisposed to take a view contrary to that of the Registrar, with respect it comes dangerously close to ignoring the importance of recognising the very significant experience which the Registrar has in dealing with trade mark applications. That is an experience which no court has, or could be expected to have. The court has traditionally paid considerable respect to the views of the Registrar when considering the exercise of the discretion.

18.  More recently, the statutory provision in the United Kingdom has changed. It would appear that the Trade Marks Act 1994 does not contain any provision corresponding to the previous sections 52 and 8(2). The Court of Appeal in England in the case of Reef Trade Mark [2003] R.P.C. 5, considered the position under the Civil Procedure Rules. Robert Walker LJ (as he then was), with whom the other members of the court agreed,referred to “the degree of respect which has traditionally been shown to a hearing officer’s specialised experience.” He went on to say that in circumstances where the hearing officer did not hear any oral evidence, an appellate court should show a real reluctance but not the very highest degree of reluctance which was necessary to interfere in the absence of a distinct and material error of principle.

19.  In Hong Kong there has also been a change in the statutory provisions. Under the previous Trade Marks Ordinance Cap. 42 it was provided in section 79:

“ (2) In any appeal from a decision of the Registrar to the Court under this Ordinance, the Court shall have and exercise the same discretionary powers as under this Ordinance are conferred upon the Registrar.”

20.  That corresponded to section 52 of the Trade Marks Act 1938. In the Trade Marks Ordinance now in force, section 85 does not refer to discretion as such but would appear to encompass it. It provides:

“General powers of court

The court may, for the purpose of determining any question in the exercise of its original or appellate jurisdiction under this Ordinance, make any order or exercise any other power which the Registrar could have made or exercised for the purpose of determining that question.”

21.  This wording is somewhat reminiscent of the powers under the 1925 Act and, indeed, the powers of the Court of Appeal under the section 13(4) of the High Court Ordinance:

“4) For the purposes of and incidental to-

(a)  the hearing and determination of any appeal to the Court of Appeal; and

(b)  the amendment, execution and enforcement of any judgment or order made on such an appeal,

the Court of Appeal shall have all the authority and jurisdiction of the court or tribunal from which the appeal was brought.”

22.  In my view, the correct approach is that the Registrar’s opinion has to be fully and carefully considered. The Registrar has very particular experience. Any departure from the way in which the Registrar exercised his discretion has to be made upon a sound basis after giving full and most careful consideration to the Registrar’s views and reasons. The exercise of discretion by the Registrar should not be overruled simply because the court itself might have come to a different conclusion. Essentially, therefore, a similar approach should be taken to the exercise of discretion by the Registrar as by a judge.

23.  When the judge below came to consider the position under section 11(1)(b) he said:

“45.  The mark was rejected for registration on the alternative basis that, since the mark described an attribute of the relevant product, it could not be distinctive as required by TMO s.11(1)(b).  It follows from my conclusion on TMO s.11(1)(c) that registration would also not contravene TMO s.11(1)(b).”

24.  Without, I trust, being too pedantic, it should be pointed out that the test is not whether a mark “could not be distinctive” but whether it is “devoid of any distinctive character”, and that qualification is subject to subsection (2) which provides that:

“A trade mark shall not be refused registration by virtue of subsection (1)(b), (c) or (d) if, before the date of the application for registration, it has in fact acquired a distinctive character as a result of the use made of it.”

25.  Hence, it is not impossible for an unregistrable mark to become distinctive, if and when there has been use. Again, in paragraph 47 of the judgment the judge referred to the mark being “capable” of identifying the products and being “capable” of bearing a distinctive character. Those, in my view, are the wrong tests. The applicant in the present case has not relied upon any ‘use’. The question that must be asked is whether, in the absence of evidence of distinctiveness acquired by use, the mark is devoid of any distinctive character.

26.  Moreover, the fact that a mark does not fall foul of section 11(1)(c) does not and cannot affect the position under section 11(1)(b). The two subsections are quite separate. They have to be considered separately.

27.  Finally, by considering the matter in the way expressed in the judgment, it would appear that the judge has failed to consider the reasons expressed by the hearing officer. In doing so, the judge interfered with the discretion exercised by the hearing officer without indicating a sound basis for so doing.

28.  In my view, the hearing officer correctly exercised her discretion in rejecting the mark under section 11(1)(b), and I see no basis for interfering with that exercise of her discretion.

Section 11(1)(c)

29.  In my view, the hearing officer’s approach in respect of the law was entirely correct. The test under section 11(1)(c) relates to a mark which consists “exclusively” of a sign which may serve to designate, amongst other things, the characteristics of the relevant goods. In the present case the mark is the single word in capital letters. In paragraph 12 of the decision the hearing officer said:

“The applied for goods, namely condoms, are sheathlike coverings that are often promoted and preferred with reference to their sheer thinness enabling users of them to feel naked or almost as if there is no covering.  In the context of the applied for condoms, the word “naked” conveys a direct and immediate message that the goods would make the users feel naked or nearly as if the condoms are not even there.  I find the subject mark “NAKED” is simply a sign that consists exclusively of a word which may serve to describe and designate the characteristics of the goods, i.e. a type of condom that gives the users naked feeling or sensation.”

30.  The hearing officer then went on to refer to 3 specific instances of the use of the word ‘naked’ on Internet web pages in relation to what were in effect advertisements for condoms. She came to the conclusion that the mark conveyed the immediate message that the condoms to which the mark were applied gave a naked feeling or sensation to the users.

31.  Quite apart from applying the threefold test suggested by the Advocate General Jacobs in the DOUBLEMINT case - despite the fact that the hearing officer had, as noted above, given valid reasons for casting doubt on the rigid application of, in particular, the third criteria - the judge below dismissed the hearing officer’s view of the matter merely by saying in paragraph 25 of the judgment that he “was not persuaded by her assessment.” As I have earlier stated, that is not the appropriate test on an appeal involving the exercise by the hearing officer of her discretion. In this respect it is to be noted that the judge did not go so far as to say that the hearing officer was clearly wrong. Indeed, he said in paragraph 30:

“Accordingly, some possibly desirable attributes of a condom can be suggestive of nakedness, while the state of nakedness itself may suggest attributes which would be desirable in a condom.  But such evocations would only be at a remove from objective fact and would require some recourse to subjective imagination.”

32.  Whilst I do not consider that the judge was justified in departing from the decision of the hearing officer on the basis of her approach, I would also say that in my view the hearing officer was entirely correct in the conclusion to which she came.

33.  Therefore, the appeal fell to be allowed. There will be an order nisi of costs here and below in favour of the appellant.

Hon Stone J:

34.  I agree with the reasons for judgment of the Vice President.

Hon Lunn J:

35.  I agree with the judgment of Rogers VP.