NERIUM BIOTECHNOLOGY, INC.AND OTHERS v. NERIUM INTERNATIONAL,LLC AND ANOTHER

HCA 1188/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1188 OF 2016

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REASONS FOR DECISION

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Index

INTRODUCTORY MATTERS

  Procedural history

    Writ of Summons

    Inter partes summons for interlocutory injunction

    Hearing on 25 and 26 August 2016

    Hearing on 29 September 2016

    Reasons for decision

FACTUAL BACKGROUND OF THE CASE

  The case for the plaintiffs

  The case for the defendants

VENUE

RELEVANT PRINCIPLES CONCERNING THE GRANT OF AN INTERLOCUTORY INJUNCTION IN RELATION TO TRADE MARKS

  Introduction

  Trade marks

  Interlocutory injunction

  Discussion

FORTIFICATION OF USUAL UNDERTAKING AS TO DAMAGES

RECEPTION INTO EVIDENCE OF AFFIDAVIT OF ERIC JAMES HAYNES

CONCLUSION

INTRODUCTORY MATTERS

Procedural history

Writ of Summons

1.  On 5 May 2016, the plaintiffs issued a writ against the defendants claiming an injunction against the defendants from infringing the plaintiffs’ registered trade marks particularised in paragraph (1)(a) of the writ and infringing the Company Agreement of Nerium International LLC (the 1^st defendant) effective as of 25 October 2010 by, without the written licence or consent of the plaintiffs, using in the course of trade or business any of the signs set out in paragraph (1)(a) of the writ.  The claim is pursuant to section 18(3) of the Trade Marks Ordinance, Cap 559.

2.  A further basis for seeking the injunction appears in paragraph (1)(b) which seeks the restraint of a variety of what might be characterised as commercial products which are not manufactured by the 1^st and/or 2^nd plaintiff using certain Registered Marks; certain infringing marks or any mark which contains the word Nerium without the written licence of the plaintiffs including certain products set out in Annexure B in the Writ of Summons.

3.  Further bases for seeking the injunction concern the alleged breach of a Company Agreement set out in paragraphs (1)(c) and (d).

4.  There is also a claim for an injunction in respect of certain allegations passing off: paragraph (1)(e).

5.  Paragraphs (2), (3), (4), (5), (6), (7), (8) and (9) seek orders and declarations which are, in effect, incidental to the claims outlined in the preceding paragraphs.  Paragraphs (10) – (16) are further remedies sought by the plaintiffs.

6.  The claim in the writ is more complex than that but for present purposes the essence of the concern of the plaintiffs is the infringement of Nerium Biotech’s registered trade marks.

Inter partes summons for interlocutory injunction

7.  On 24 May 2016, the plaintiffs took out an inter partes summons for an interlocutory injunction to restrain the defendants from conduct which is, in essence, that for which the Writ of Summons was issued. The object of this application for interlocutory relief is plainly stated in the submissions on behalfof the plaintiffs and also in the affidavit evidence: to prevent the launch in Hong Kong of the Optimera Products marketed by the defendants which the plaintiffs say are not authorised for sale using the “NERIUM” mark.  The plaintiffs say that such a mark is owned by Nerium Biotech and/or Nerium Skincare, both on its own as an unregistered trade mark as well as the most prominent and distinctive element of Nerium Biotech’s Registered Marks in Hong Kong.  This is because the plaintiffs say that this amounts to trade mark infringement and passing off in Hong Kong and is a breach of the Company Agreement.  Other prayers for relief are included in the summons in relation to the application for an injunction but that gives the flavour of that component of the claim. In addition, the summons seeks an order that leave be granted to the plaintiffs to issue a Concurrent Writ of Summons in this action against the 1^st defendant and to serve, on an expedited basis, a sealed copy of the Concurrent Writ of Summons and the inter partes summons.

8.  On 27 May 2016, Deputy High Court Judge Kent Yee ordered, amongst other things, that leave be granted to the plaintiffs to issue a Concurrent Writ of Summons in the action against the 1^st defendant on an expedited basis in the terms sought by the plaintiffs in their summons and for service out of the jurisdiction.  There were other orders made but that is for present purposes the critical order.  Both counsel for the plaintiffs and counsel for the 2^nd defendant were heard by the learned Judge in connection with the application before him.  The application for the interlocutory injunction, the proceedings before me, were adjourned to 25 and 26 August 2016.

9.  On 26 July 2016, the defendants took out a summons to set aside the orders made by Deputy High Court Judge Kent Yee in relation to service out on the basis that:

(a) no good causes of action or any real or serious issues to be tried have been shown by any of the plaintiffs against the 1^st defendant;

(b) Hong Kong is not the appropriate forum for trial of any of the alleged claims relied on by the plaintiffs against the defendants;

(c) the plaintiffs failed to bring themselves within Order 11, rule 1(1)‌(b), (c), (e) or (f);

(d) there was material non‑disclosure on the part of the plaintiffs in their ex parte application; and/or

(e) the case is otherwise not a proper one for service out of the jurisdiction on the 1^st defendant.

The defendants also sought a declaration that, in the circumstances of the case, the court should not exercise any jurisdiction it may have over the defendants in so far as the plaintiffs’ cause of action against any of them is in relation to any alleged breach of the Company Agreement referred to in Paragraphs (1)(c) and (d) of the Endorsement of Claim contained in their Writ of Summons dated 5 May 2016, on the grounds as set out in Order 12, rule 8(2A) (a) and/or (c) of the Rules of the High Court.

Hearing on 25 and 26 August 2016

10.  A hearing of the inter partes summons for an interlocutory injunction and the summons taken out by the defendants proceeded before me on 25 and 26 August 2016.  Quite how anyone could have thought that two days was adequate for this hearing is difficult to understand.  At the conclusion of the 2^nd day, we were about two thirds of the way through the oral submissions made on behalf of the plaintiffs.  With some brief exceptions, no oral submissions had been made on behalf of the defendants. That said, the defendants had filed substantial and detailed written submissions which formed, in part, the source of questions by the court of counsel for the plaintiffs.  In addition, the defendants filed an affidavit from the CEO of the 1^st defendant and, over the objection of the plaintiffs (of which more later), of a legal adviser of the defendants.

11.  What was abundantly plain was that, with the best will in the world, further time would be needed to hear the conclusion of the oral submissions of the plaintiffs and the oral submissions of the defendants.  Indeed, 3 further days in December 2016 have been appointed for that purpose.

12.  At the conclusion of the hearing on 25 and 26 August 2016, as it became increasingly obvious that the hearing could not be concluded on those days, the issue of temporary relief to abide the event of the further hearing in December arose.  Two things followed from that.  The first was the listing of the matter for two hours on 29 September 2016 for the purpose of discussing temporary injunctive relief to abide the event of the further hearing in December.  The second thing was an order crafted to meet some short‑term concerns of the plaintiffs. The essence of those concerns was that the defendants might, in the interim, launch products in violation of the claim to rights of the plaintiffs outlined in (1)(a) of the Writ of Summons and the inter partes summons for an interlocutory injunction.  The basis for this was that the plaintiffs believed that the launch of certain of the products bearing marks in violation of rights claimed by the plaintiffs was imminent.  A form of injunctive relief was crafted and is Annex 1 to these reasons.

Hearing on 29 September 2016

13.  On 29 September 2016, the date appointed for hearing applications for temporary interlocutory injunctive relief to abide the event of the further hearing of the matter in December 2016, was taken up with two matters.  First, the defendants, over the strenuous opposition on the part of the plaintiffs sought leave to introduce further evidence on affidavit.  That took up about half of the time appointed. The balance was taken with the hearing of the request for interim interlocutory orders in connection with the inter partes summons for aninterlocutory injunction.  In the result, I gave leave to the defendants to introduce the further evidence on affidavit.  In granting leave, I indicated orally that in view of the contents of the affidavit I was unlikely to place great weight on the bulk of that affidavit for reasons I will outline below.  Greater weight might be placed on this affidavit following the further hearing of this matter.  My views until the final resolution of the interlocutory summons is fully heard remain, of necessity, provisional.  In relation to the application for temporary interlocutory injunctive relief to abide the event of the further hearing of the matter in December 2016, I ordered relief in the terms set out in Annex 2.  While the language and, in some respects, the content of the orders set out in Annex 1 and Annex 2 is different, it will be obvious that the majority of the content is substantially the same.

Reasons for decision

14.  Set out below are my reasons for decision for making the orders on 26 August 2016 and 29 September 2016.

15.  It needs to be noted at this stage that, firstly, the orders that I made on 26 August 2016 and 29 September 2016 concern only the trade mark aspect of the claim of the plaintiffs. Nevertheless, the factual material proffered by both the plaintiffs and the defendants deals with other aspects of the claims of the plaintiffs and the applications made on the part of the defendants.  There is a substantial amount of overlap. Secondly, in making the orders that I did, I was acutely conscious that whatever decision I made it was one with potentially substantial economic consequences for the parties.  While it is obviously impossible for me to quantify the economic scope of what is at stake for the parties, I think that it is no understatement to say that those economic consequences involve, amongst other things, many, many millions of dollars.[1]  I say “amongst other things” because, as I will discuss in a little more detail below, the claim of the plaintiffs must involve more than that which can be compensated by money alone.  Thirdly, I am acutely conscious of the fact that the orders made on 26 August 2016 and 29 September 2016, at least so far as the issue of temporary interlocutory relief was concerned, were made against the background that I had not heard the oral submissions to be made on behalf of the defendants.  As I have already mentioned, I have read the extensive written submissions made on behalf of the defendants and the affidavits made in support of the defendants’ case and so it could not be said that I have not heard what I expect to be a relatively complete written assertion of the case for the defendants.  That is not, in any way, intended to diminish the value which I place on oral submissions.  These reasons have tried to make allowance for the deficiencies which might occur by reason of not having had the benefit of oral submissions.  However, while there are always matters which arise during the course of a hearing which can best be dealt with by oral submissions, I would be astonished if there was any great or important matter relevant to the case for the defendants which was not covered in the written submissions and in the evidence tendered on behalf of the defendants.

16.  These reasons are, of necessity, provisional because there is more to be heard.  Nothing is set in stone.

FACTUAL BACKGROUND OF THE CASE

17.  As these are interlocutory proceedings determined on affidavit, not all of the relevant facts are accepted by all sides.  There are aspects of the narrative which are, to say the least, hotly disputed as between the parties and it is not only impossible but wholly inappropriate on the basis of affidavit evidence to resolve these disputes. That, indeed, is the entire nature of the interlocutory proceedings at issue.

18.  Accordingly, what I have done, rather than attempt an overall summary of the factual case for the plaintiffs and for the defendants, is to outline their respective factual claims relevant to the interim orders I made.  Of necessity, there is some spill over into facts relating to other claims.

The case for the plaintiffs

19.  Nerium Biotechnology, Inc, the 1^st plaintiff, claims to be an international research and development company incorporated in Canada in 2006.  Since incorporation, the 1^st plaintiff has traded under and used the “NERIUM” name and mark.[2]  The 1^st plaintiff asserts that it focuses on science‑based product development, and has conducted research and product development on the anti‑cancer, anti‑viral, immune stimulating, and dermal properties of natural botanical compounds.[3]  From this activity, the 1^st plaintiff asserts that it discovered beneficial extracts and compounds derived from the Nerium oleander plant.  In this regard, the 1^st plaintiff says that it achieved this by inventing, and utilising proprietary and patented technologies and it has been able to successfully isolate and extract unique components from that plant which eliminate the toxic effects of the plant whilst preserving its beneficial properties.[4]  The case for the plaintiffs is that, following further research by the 1^st plaintiff, the results showed that the NAE-8 Compound had remarkable skincare properties and anti‑ageing efficacy.  The 1^st plaintiff then undertook efforts to make the NAE-8 Compound available in the form of skincare and/or over the counter products.[5]

20.  The case for the plaintiffs says that in January 2007, the 1^st plaintiff reserved and registered a number of different domain names with “NERIUM” in the name.  These included www.nerium.com.[6]  Further, in 2009, Nerium SkinCare Inc — the 2^nd plaintiff — was established as a division of the 1^st plaintiff, to undertake the development, formulation, clinical testing, manufacturing, commercialisation, and regulatory approval of natural skin care products, including in particular products containing the NAE-8 Compound, based on the 1^st plaintiff’s research, technology, and intellectual property.[7]  The 2^nd plaintiff was later incorporated in 2010 as a wholly‑owned subsidiary of the 1^st plaintiff to perform the functions outlined earlier.  The 2^nd plaintiff was expressly authorisedby the 1^st plaintiff to use “Nerium” as part of its name.[8]  Apparently, in connection with these responsibilities, in 2009, the 2^nd plaintiff developed two skincare products, namely “NeriumDerm” and “NeriumCS”.[9]  These products were produced, and appear to have been test marketed in 2010 and 2011 to shareholders, friends of shareholders and the market in San Antonio, Texas.[10]

21.  More pertinently, the case for the plaintiffs is that since at least 2008, the 1^st plaintiff and/or the 2^nd plaintiff have continuously used the mark “NERIUM” and other similar marks to identify and distinguish its products and services, which include cosmetic and skincare products containing the NAE-8 Compound.[11]  Critically, this use is said to have occurred in Hong Kong, the United States and internationally.  In this regard, the 1^st plaintiff also applied to register and has succeeded in registering marks containing the house mark “NERIUM” in Hong Kong, the US and internationally.[12]  The case for the plaintiffs is that even prior to the establishment of the 1^st defendant and the execution of the Company Agreement (of which more in a moment), the 1^st plaintiff had already applied to register the marks “NERIUM SKINCARE”, “NERIUMDERM”, “NERIUMCS”, and “NERIUMRX” amongst others in the US.[13]  In Hong Kong, the case for the plaintiffs is that the 1^st plaintiff has registered the marks “NERIUMFIRM”, “NERIUMAD”, and “NERIUMRX”.[14]  The 1^st plaintiff also has five pending trade mark applications in Hong Kong which contain the house mark “NERIUM”.[15]  The 2^nd plaintiff applied to register the NeriumAD mark in the United States on 12 July 2011.  That was 3 months after the execution of the Company Agreement.[16]  In support of their contention that they not only own the relevant marks but are recognised as doing so, the plaintiffs point to an incident in 2012 where the 1^st defendant asked the 2^nd plaintiff to intervene in a complaint to Google AdWords because Google would only respond to the owner of the trade mark and not to the 1^st defendant.  A further incident arose in 2014 in connection with this where the alleged misuse of Nerium on a website was referred by the 1^st defendant to the 2^nd plaintiffs.[17]

22.  The case for the plaintiffs is that following what appears to have been a test marketing exercise, the 1^st plaintiff started looking for other means of marketing their products.  In this regard, in early 2010, Mr Dennis Knocke, the Chairman and Chief Executive Officer of the 1^st plaintiff was introduced to Mr Jeffrey Olson who asserted that he had extensive experience with what is characterised as “multi‑level marketing.”[18]  The 1^st plaintiff decided to pursue the multi‑level marketing approach with Mr Olson.[19]  The plaintiffs say that the1^st defendant was formed as a Texas Limited Liability Company, in anticipationthat it would act as distributor of skincare products developed by the 1^st plaintiff/‌the 2^nd plaintiff in accordance with the draft Company Agreement which had been exchanged between the parties.[20]

23.  After further negotiations, the case for the plaintiffs is that the 1^st plaintiff, the 2^nd plaintiff, Mr Olson, and JO Products, LLC (Olson’s company), entered into the Company Agreement for the governing of the 1^st defendant. The Company Agreement was dated 6 April 2011 but was effective as of 25 October 2010.  Under the Company Agreement, JO Products LLC owns 70% of the 1^st defendant and the 2^nd plaintiff owns 30%.[21]

24.  The plaintiffs point to certain extracts from the Company Agreement.  In particular, the plaintiffs point to:

(a) Article 2.05 which the plaintiffs contend states the primary purposes of the 1^st defendant, namely the “development, purchase, distribution and sale of all cosmetic and over the counter products that have been developed, or are in the future developed, by Nerium and/or, its affiliated company, Nerium Biotechnology, Inc, some of which will be utilizing and/or incorporating extracts from the Nerium Oleander, (collectively the “Product Line”) ...”

(b) Article 4.03 of the Company Agreement states amongst other thingsthat:

(i) the 2^nd plaintiff would be “tasked with the production of the Product Line and its delivery, FOB origin ... to the distribution facilities of the Company fully packaged and ready for distribution”; and

(ii) the 2^nd plaintiff would “use its best efforts to research and develop of [sic] additional products to expand, augment and broaden the Product Line”.

(c) The “Product Line” is defined and includes products to be distributed both on exclusive and nonexclusive bases, all of which were stated to be produced by the 1^st plaintiff and the 2^nd plaintiff.

(d) “Intellectual Property Assets” are defined in Article 20.01(d)(i) and include such intellectual property or other rights as defined as “Marks”, “Patents”, “Copyrights”, “Trade Secrets”, and “Product Line History” therein.

(e) In relation to the ownership of the Intellectual Property Assets, Article 20.0l(d)(ii) states “The Intellectual Property Assets are all those necessary for the production of the Product Line and [the 2^nd plaintiff] is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and has the right to use without payment to a third party all of the Intellectual Property Assets”.

(f) As to the scope of the 1^st defendant’s permitted use of the Intellectual Property Assets, Article 20.0l(d)(viii) provides that “in conjunction with the rights of [the 1^st plaintiff] to market, sell and distribute the Product Line, [2^nd plaintiff] will grant perpetuallicenses to allow [the 1^st defendant] the right to utilize the Intellectual Property Assets, or, to the extent that such rights are held by a third party, insure that such third party grants [the 1^st defendant] such licenses to utilize such Intellectual Property Assets to the extent reasonably necessary for the marketing, distribution and sale of the Product Line”.

(emphases supplied in written submissions on behalf of the plaintiffs)

25.  The case for the plaintiffs also relies on assertions in the Product Line which is an attachment to the Company Agreement.  In particular the plaintiffs say that “all of the products included in the Product Line are stated to be ‘produced by Nerium [Skincare] and/or Nerium Biotech’.”[22]  Further, the plaintiffs point to Article 4.03 of the Agreement which contemplates the future execution of a Distribution and Licensing Agreement between the 1^st defendant and Nerium SkinCare to “... provide for the use of the intellectual property, formulation of the Product Line, the farming, the storage of the Nerium oleander plants, the processing of the Nerium oleander plants into biomass (powder), biomass storage, and the manufacture of the specific products that comprise the Product Line”.  The plaintiffs say that an agreement as contemplated by article 4.03 has never been agreed.  What appears to be critical in this regard is the formulation of the Product Line and the use of “the intellectual property”.[23]  The plaintiffs point to article 20.01(d) which is said to confirm that Nerium SkinCare and/or its affiliated company Nerium Biotech “own all of the intellectual property assets used on or in connection with the Product Line.”[24]

26.  The case for the plaintiffs was that under the Company Agreement:

(1) The 1^st plaintiff / 2^nd plaintiff remain the owners of the Intellectual Property Assets under the Company Agreement, including the 1^st plaintiff’s Registered Marks.

(2) The 1^st defendant would market, sell, and distribute the Product Line developed (or would in future be developed) by the 1^st plaintiff and/or the 2^nd plaintiff.

(3) In conjunction with purposes such as marketing, sales, and distribution of the 1^st plaintiff / the 2^nd plaintiff’s Product Line, the 1^st plaintiff / the 2^nd plaintiff would permit or licence to the 1^st defendant the right to utilise the Intellectual Property Assets.

27.  In essence, the case for the plaintiffs comes to this, the intellectual property owned by the 1^st and 2^nd plaintiffs:

(1) Could only be used by the 1^st defendant if allowed or licensed by Nerium SkinCare and/or Nerium Biotech; and

(2) Any use by the 1^st defendant was limited to use which was reasonably necessary for the marketing, distribution and sale of the Product Line and, as set out above, the Product Line was limited to products produced by 1^st plaintiff and/or the 2^nd plaintiff.

28.  The case for the plaintiffs was that pursuant to the Company Agreement, the 1^st plaintiff/the 2^nd plaintiff decided that the first skincare product to be sold by the 1^st defendant should be branded “NeriumAD”, using the 1^st plaintiff / the 2^nd plaintiff’s distinctive “NERIUM” house mark with the “AD” referring to “Age‑Defying”, and NeriumCS with “CS” meaning cold sore.[25]  The plaintiffs say that, consistent with the rightful ownership of the intellectual property assets, the 1^st plaintiff successfully registered the “NeriumAD” mark both in the United States and in Hong Kong.[26]

29.  The case for the plaintiffs is that, at least for a while, things appeared to be going well and in accordance with the Company Agreement.  In particular, the plaintiffs refer to the launch of “NeriumAD” in the United States.  The plaintiffs accept that this product was manufactured, packaged and supplied by the 2^nd plaintiff to the 1^st defendant for marketing and distribution.[27]  According to the plaintiffs, this was how things were supposed to be done.  Further products were promoted and sold in this way in the US.[28]  The plaintiffs accept that “NeriumAD” products were advertised, promoted and sold in Hong Kong via what were characterised as third‑party Internet sites.[29]

30.  The case for the plaintiffs is that all did not continue going well.  They say that without their knowledge or consent in 2014, the 1^st defendant developed a new line of products called “Optimera” which did not contain the NAE-8 Compound.  It is to be recalled that this is the compound that the 1^st plaintiff identified and isolated and, on the basis of the plaintiffs’ case was utterly critical to the formulation and marketing of the “Nerium” range.[30]  The plaintiffs say that they confronted the 1^st defendant and the explanation that was offered was the 1^st defendant wanted to offer for sale a product without the NAE 8 Compound which it characterised as a temporary “placeholder” in certain countries.  This was said to be for the period while the 2^nd plaintiff was in the process of securing regulatory approval for the “NeriumAD” Products in those countries.[31]  The plaintiffs point to the launch of “Optimera” products in Canada and Mexico at different times in 2014.[32]  The plaintiffs make the point that the “Optimera” so launched did not bear the “Nerium” name or mark and the labelling of the packaging was different from products manufactured by the plaintiffs.  According to the plaintiffs, this continued for some time.  It is to be recalled and is significant, so the plaintiffs say, that the “Optimera” range was not manufactured by the plaintiffs and did not contain the NAE-8 Compound.  This was, so the plaintiffs say, in breach of the Company Agreement.

31.  In and around late 2014 and early 2015, two important things were going on.  According to the plaintiffs, the 1^st defendant informed the 2^nd plaintiff of the countries into which it wished to expand.  That, so the plaintiffs say, involved the 2^nd plaintiff in expending effort and time in obtaining relevant regulatory approval in those countries.[33]  Those countries included Hong Kong.  In Hong Kong, what is characterised as legal clearance was successfully obtained for the NeriumAD Products in October 2014.[34]  In order to enable import of the NeriumAD Products into Hong Kong, the 3^rd plaintiff was incorporated as a wholly‑owned subsidiary of the 1^st plaintiff in November 2014.  The second thing that was going on was an attempt, so the plaintiffs say, to resolve disputes between the 1^st and 2^nd plaintiffs on the one hand and the 1^st defendant on the other hand.  The focus of these disputes would appear to have concerned the continued manufacturing and distribution of the “Optimera” products.[35]  The case for the plaintiffs was that in the course of those negotiations the parties contemplated that the 1^st plaintiff / the 2^nd plaintiff would take over the manufacture of the Optimera Products.[36]  Further, the case for the plaintiffs is that the 1^st defendant stated that it wanted to re‑brand the packaging of the NeriumAD Products and the Optimera Products.[37]  The plaintiffs say that the 1^st plaintiff and the 2^nd plaintiff objected to the re‑branding proposal but agreed not to interfere with it while the parties continued to try to resolve their disputes.  The plaintiffs say that they were assured by the 1^st defendant that the re‑brand was consistent with the goals of replacing the Optimera Products with the NeriumAD Products once the latter received international approvals and of allowing the 2^nd plaintiff to become the manufacturer of the Optimera Products so that the 2^nd plaintiff could control the quality of the product.[38]  The case the plaintiffs set out is that the packaging design of the Optimera Products and NeriumAD Products became practically identical.[39]  Despite the 1^st plaintiff / the 2^nd plaintiff’s agreement to the re‑branding, the plaintiffs contend that the parties were unable to settle their dispute and the 2^nd plaintiff did not become the manufacturers of the Optimera Products.

32.  Apparently, mediation proceedings were attempted.  Settlement discussions were, according to the plaintiffs, continuing but notwithstanding this, the 1^st defendant re‑designed the www.nerium.com website to remove the extensive references to the 1^st plaintiff/the 2^nd plaintiff and their responsibility for developing, manufacturing, supplying and ensuring the quality of the NeriumAD Products.[40]  The plaintiffs say that the amended website misleadingly represents that the 1^st defendant is the supplier and source of NeriumAD Products, the proprietor of the patented method to extract NAE-8 and the owner of the trade mark for “NAE-8”.[41]

33.  The plaintiffs say that the assertion about “Optimera” being a placeholder for the “NeriumAD” products was exploded in relation to the launch of the former in Korea.  Regulatory approval had already been obtained for “NeriumAD” and thus there was no need, so the plaintiffs say, for any placeholders.

34.  As has already been mentioned, part of the business discussions which continued between the parties involved rebranding. The plaintiffs’ case is that the parties contemplated that Nerium SkinCare and Nerium Biotech would manufacture both the NeriumAD products and the Optimera Products.  The object of this included, according to the plaintiffs, an anxiety that the Optimera Products be manufactured according to the standards set by the 1^st and 2^nd plaintiffs.  In short, the 1^st and 2^nd plaintiffs would agree to the “re‑branding” exercise which would involve an obvious derogation of the trade mark rights of the plaintiffs provided they were to be the manufacturers of the Optimera Products.[42]  At the time of the announcement of the re‑branding, the case for the plaintiffs is that there had been no agreement reached as to the manufacture of the Optimera Products.[43]

35.  Relations between the parties further declined and proceedings against the 1^st defendant, Mr Olson, and JO Products LLC were commenced in Texas.[44] Further proceedings were issued in New York.[45] Those latter proceedings were consolidated into the Texas proceedings.[46]

36.  The essence of the claim so far as the intended launch in Hong Kong is concerned is that the use of the “Nerium” mark on the Optimera Products is an infringement of the 1^st plaintiff’s Registered Marks.  (There are also claims in passing off and/or breach of the Company Agreement but that does not concern the immediate orders.)  The plaintiffs point to advertising and promotional activities by the 1^st defendant which, so the plaintiffs say, have the effect of falsely and misleadingly associating the Optimera Products with the “NeriumAD” products.  This is said to be because of similar layouts in the promotion of the Optimera Products on the websites controlled by the 1^st defendant.[47]  The same is said by the plaintiffs to occur on YouTube[48]; Facebook[49]; and online blog posts.[50]  Objection is also taken by the plaintiffs to what they characterise as the wrongful use of the “NeriumAD” Product Line History (which outlines the history, source and development of the “Nerium” products) and which, so say the plaintiffs, seeks to wrongly associate or imply that Optimera Products have the same source, origin quality, efficacy or sponsorship as the “NeriumAD” products.[51]  The problem of wrongful association is, so the plaintiffs say, compounded by what are characterised as problems and complaints about the quality and standards of the Optimera Products.[52]  Further products have been marketed in North America which, so the plaintiffs say, misleadingly use the “Nerium” trade mark owned by the plaintiffs without their authorisation or consent.[53]  The plaintiffs also point to attempts by the 1^st defendant to register marks bearing “Nerium”, being the house name/mark of the 1^st plaintiff and the 2^nd plaintiff.[54]  Further, the 1^st defendant applied to invalidate the registered mark owned by the 1^st plaintiff “NeriumAD” in Hong Kong.[55]

37.  The plaintiffs believe that the 1^st defendant intends to market and distribute Optimera Products in Hong Kong in the near future.[56]  The plaintiffs contend that it is necessary in the light of the background to the matter outlined by them and summarised above by me that it is necessary to restrain what the plaintiffs fear will be an infringement or threatened infringement of various intellectual property rights held by the plaintiff.

The case for the defendants

38.  It is the defendant’s position that the plaintiffs have all along been aware of, consented and/or acquiesced to the marketing of Optimera Products and the defendants deny that such consent and/or acquiescence is, in any event, necessary.[57]

39.  Nerium International was incorporated on 25 October 2010 under the laws of Texas.  Nerium SkinCare, the 2^nd plaintiff, holds 30% of the shares of NI, whilst the remaining 70% of the shares are owned by JO Products LLC, a company solely owned by Jeffrey Olson.[58]  The 1^st plaintiff was formed to carry out research into treatments arising from the Nerium Oleander plant.  However, the company had no marketing experience.[59]  The introduction to one of the principals of the 1^st plaintiff, Mr Knocke, was said to come against the background of the 1^st plaintiff being in some financial difficulty.[60]  Mr Olson has a background and experience in marketing.[61]

40.  The case for the defendants is that the 1^st defendant was formed in October 2010 with the shareholding outline above.[62]  The rationale for this, on the defendants’ case, is the reliance on the expertise of Mr Olson and the costs and expenses involved in the marketing effort.[63]  The intention was that Mr Olson would have sole and exclusive control of the management of the 1^st defendant and, in this regard, the defendants point to clause 6.01 of the Company Agreement.[64]

41.  The case for the defendants is that the 1^st defendant is the only marketing channel for the Nerium products, and Nerium SkinCare is not entitled to market the Nerium products through other channels (see Clause 4.03 of and Exhibit C to the Company Agreement).[65]  The defendants say that this is expressly accepted by the plaintiffs in §3 of their Skeleton Submissions filed on 23 August 2016.[66]  Accordingly, the defendants say, the 1^st defendant has been and will be the only company marketing the Nerium products in the market (including Hong Kong).[67]

42.  It is accepted by the defendants that no separate agreement has been entered into as would appear to be contemplated by Clause 4.03 of the Company Agreement.  Such an agreement was contemplated to cover the use of intellectual property, formulation of the Product Line, the manufacture of specific products which comprise the Product Line and other matters.[68]  The defendants assert that the explanation for this failure to come to an agreement contemplated by Clause 4.03 is simply a failure to agree to the terms as opposed to the assertion on behalf of the plaintiffs that the 1^st defendant has refused to enter into such an agreement.[69]

43.  The case for the defendants is that prior to the advent of the Company Agreement there was, at most, a very limited distribution of products by Nerium SkinCare.[70]

44.  The “N” logo was developed and designed by a company engaged by the daughter of Mr Olson.  The company, known as AM design, came up with the “N” logo in early 2011.  Once the design was settled, the 1^st defendant paid for the design work.[71]  The plaintiffs did not create the NeriumAD name that they have registered in Hong Kong (and elsewhere), and they have never marketed or sold any products under that name themselves.  Around April 2011, the 1^st defendant created the name NeriumAD for the Product Line during internal discussions at a meeting within the 1^st defendant.[72]  The defendants say that the overall appearance of the get‑up for the Product Line created and developed by the 1^st defendant is substantially different from that used by Nerium SkinCare in respect of the old Nerium Derm.  The cylindrical shaped bottle that narrows at the centre is not itself a unique or in any way distinctive form of packaging, and similar shapes of bottles can be seen being used in relation to cosmetic or skincare products of other brands from time to time.[73] Further, the defendants say that the elements of the colour scheme, typeface, and logo for the Product Line were developed by the 1^st defendant and are totally different from the old products.  The defendants say that the initial product under the Product Line marketed by the 1^st defendant, which was launched in August 2011 was the Nerium Age Defying Night Cream, using the NeriumAD name; this was the first time this name was used on any products by anyone.[74]

45.  The defendants say that in 2014 the 1^st defendant decided to redesign the getup for all products that it distributed.  To this end.  The 1^st defendant hired a third‑party to develop a new look for its products.  The 1^st defendant decided to display its own name more prominently on all of the packaging.  In this regard, the case for the defendant is that the general public regard the 1^st defendant as the sole trade source for these products.  The defendants say that the 1^st plaintiff was not involved in the sale or marketing of the product line and had no input of an extensive nature into the packaging or marketing materials.  The defendants say that solely as a matter of courtesy comments were invited from the 1^st plaintiff as to the redesign process which was said to have taken place in 2014 and early 2015.[75]

46.  The defendants reject the assertion of the plaintiffs that the Optimera Products are unauthorised products or knock‑offs seeking to take advantage of the Nerium name or brand.  They contend that first, NI is and was all along entitled to develop and market products other than those under the Product Line.  It is the position of the defendants that the Company Agreement does not prohibit NI from developing and marketing its own products.[76]  Further, the defendants contend that the 1^st and 2^nd plaintiffs were aware of the development and marketing of the Optimera Products.  The defendants say that these products were openly marketed by the 1^st defendant and that there has been substantial promotion and advertisement in respect of these products.[77]

47.  The defendants also reject the assertion that the Optimera Products were originally intended to be “placeholder” products for the international market. The defendants say that 1^st and 2^nd plaintiffs were well aware that the reason that the 1^st defendant developed the Optimera Products was because the 1^st plaintiff “has failed to provide [the 1^st defendant] with a product which is internationally marketable.”[78]  The defendants say that the marketing of these products requires the availability of information in connection with “clinical results and statistics”.  In effect, the defendants say that the 1^st plaintiff has refused to provide the relevant “proprietary” information.[79]  The defendants contended that the marketing of the Optimera Products is to continue at least until Nerium SkinCare can provide the “internationally marketable” products to the 1^st defendant.  While the 1^st defendant is still interested to market the new international products developed by Nerium SkinCare, the longer the delay for Nerium SkinCare in providing the 1^st defendant with the internationally marketable products, the harder it is for the 1^st defendant to phase out the Optimera Products because of the substantial time, effort and resources the 1^st defendant has incurred on their promotion and marketing, as well as the success that the 1^st defendant says that such products have achieved so far.[80]  The defendants say the marketing of the Optimera Products has been conducted openly and the 1^st and 2^nd plaintiffs have received profits arising from the sales of such products.  The defendants also assert that the products produced by the 1^st and 2^nd plaintiffs have had quality control and supply problems and they havenot been able to provide “adequate support for the marketing of the products both domestically and in the international market.”[81]

48.  The defendants also say that the 1^st and 2^nd plaintiffs have been “intentionally overcharging” the 1^st defendant for its products.  This is said to be supported by an independent audit which revealed, so the defendants say, wrongful inflation of the cost of its products.[82]

49.  The defendants say that in 2014 and early 2015 that the 1^st and 2^nd plaintiffs agreed to a rebranding exercise in which the 1^st defendant would rebrand all of the products, including the Optimera Products, “under the same trade dress”.  The defendants do not accept as true the basis upon which the 1^st and 2^nd plaintiffs were prepared to agree to that process.  The defendants specifically reject as untrue that it was contemplated that the 1^st and 2^nd plaintiffs would be the manufacturers of the Optimera Products.  This is described by the defendants as “nothing but a lie.”[83]  The defendants’ position is that the plaintiffs accepted the rebranding and point to a purchase order as evidence of that acceptance.[84]  The defendants say that they have never agreed to the 1^st plaintiff being the manufacturer of the Optimera Products.  Further, the defendants say that concerns expressed by the 1^st and 2^nd plaintiff over the quality of these products is unfounded.  They go on to assert that indeed the 1^st and 2^nd plaintiffs have had “serious problems in its quality control and in the supply of products” to the 1^st defendant.  For this reason, the defendants characterise the assertion by the 1^st and 2^nd plaintiffs that they should manufacture the Optimera Products in exchange for giving up intellectual property rights as “absurd”.[85]

50.  The defendants say the reason that the 1^st and 2^nd plaintiffs have not objected to the marketing of the Optimera Products by the 1^st defendant and, more pertinently, to the rebranding exercise is because:[86]

(1) the Company Agreement prohibits 1^st and 2^nd plaintiffs from marketing their own products;

(2) there is nothing in that Agreement which prohibits the 1^st defendant from marketing the Optimera Products;

(3) the 1^st and 2^nd plaintiffs have in fact benefited from the marketing following the rebranding exercise and in this regard the defendants point to the substantial revenue as a direct benefit.

51.  The defendants reject the assertions of the plaintiffs[87] that the phrase “Real Science Real Results” used by the 1^st defendant in its promotion of the Optimera Products would have misled members of the public into the belief that the 1^st and 2^nd plaintiffs manufacture, license, sponsor, endorse or otherwise are associated or connected with the Optimera Products and, in this regard, have the same source origin or sponsorship as the NeriumAD Products.  The basis for the rejection of that contention, so say the defendants, is that the phrase “Real Science Real Results” was developed by the 1^st defendant.

52.  In relation to the issue of trade marks, the defendants say that at the time of the execution of the Company Agreement, neither party had filed any trade mark applications for the NeriumAD Products or the like in the US or elsewhere.[88]  The defendants say that they have a Registered Mark in respect of the “N” logo in classes 3 and 35.  The date of registration was 20 August 2014 and the registered number is 303108492.[89]  The defendants outline other applications for trade mark registration pending in Hong Kong.  The position of the defendants is that the 1^st defendant has been the only entity responsible for marketing the various Nerium products in the market, and the only entity to have used commercially anywhere in the world the Nerium mark or name (or any mark or name containing that word), the “N” logo device, the name “Nerium International, LLC”, and the phrase “The Nerium Experience”.  Neither Nerium Biotech nor Nerium SkinCare has used any of those commercially for any products (or any name or mark containing the word “Nerium” or any of its marks registered in Hong Kong or the United States or anywhere else), in the sense that neither of them used any of those marks or devices to seek to create a market anywhere in the world for any products with any of such names, marks or devices as an indicator of the trade origin or connection of those goods with or from any of them.  They say that as the public recognises the 1^st defendant as the trade source of the relevant products, or as the company responsible for the products, the 1^st defendant is clearly entitled to register the marks as owner.[90]  The conclusion that the defendants say follows from this is that the 1^st plaintiff should not be entitled to claim as proprietor of those marks, and that is one of the bases on which 1^st defendant applies to invalidate the earlier registrations of Nerium Biotech.[91]

53.  The defendants say that there is clearly no reasonable likelihood ofconfusion as the marks or signs used by the 1^st defendant in question, especially the “N” logo device, are completely different from those registered.  Moreover, the 1^st defendant’s products inevitably bear the prominent and distinctive “N” device and the company name of the 1^st defendant, which will no doubt eliminate any likelihood of confusion.  In so far as the 1^st defendant is using the name “Nerium” or “Nerium International” or “Nerium International, LLC” and Nerium Biotech is complaining of that, the defendants contend that the 1^st defendant is merely only using its own name to conduct business according to Clause 2.02 of the Company Agreement. Signatories to the Company Agreement, namely Nerium SkinCare, Nerium Biotech, JO Products LLC and Mr Olsen, being the shareholders and sole Manager of the 1^st defendant, are bound to conduct its business in that name.[92]

54.  In any event, the 1^st defendant contends that it has been and should be the only marketing channel for the Nerium products, and Nerium SkinCare is not entitled to market the Nerium products through other channels. So, the case for the defendants is that the marketing of the Optimera Products would not have affected or caused any damage to Nerium SkinCare which cannot be compensated by way of damages.[93]

VENUE

55.  The first issue that arises is the appropriate venue for the proceedings.  The defendants submit that the appropriate venue for the determination of the issues which arise in these proceedings is Texas in the United States of America.  The issue as to venue arises not only in relation to the determination of the application for the injunction but it also arises in relation to these interim orders to abide the event of the further hearing.  Simply put, if, after an application of the recognised principles, the appropriate venue is determined not to be Hong Kong, that is fatal to the interim orders under contemplation in this judgment.

56.  The plaintiff’s claim refers to apprehended breaches in Hong Kong of their trade mark rights registered in Hong Kong.  (It should not be forgotten that the action by the plaintiffs is also concerned with passing off wherein the allegations are based on conduct alleged to have occurred in Hong Kong.)  The defendants point to the relevance of the Company Agreement which, amongst other things, led to the formation of the 1^st defendant and say that the construction of that document is critical to the resolution of, amongst other issues, the trade mark issues.  The 1^st defendant is a company formed and resident in Texas in the United States of America.  The Company Agreement was made in Texas and is governed by Texas law.  Further, there are proceedings underway in Texas between the 1^st and 2^nd plaintiffs on the one hand and the 1^st defendant on the other for, amongst other things restraint of breaches of intellectual property rights vested in the 1^st and/or 2^nd plaintiffs.  The plaintiffs make the point that the action in Texas is based on United States intellectual property rights.

57.  On the submissions of the parties, there are 2 competing jurisdictions:Hong Kong and Texas.  The principles which govern this issue are authoritatively outlined in Esquel Enterprises Ltd & Another v Tal Apparel Ltd & Another[2006] 2 HKLRD 363.  The Court of Appeal held that the fundamental principlewas that the court would choose the forum in which the case could be tried moresuitably for the interests of all the parties and for the ends of justice.  The approach to forum non conveniens was a three stage one: (i) whether it was shown that Hong Kong was not only not the natural and appropriate forum for the trial, but that there was another available forum which was clearly or distinctly more appropriate; (ii) if so, whether a trial at this other forum would deprive the plaintiff of any legitimate personal or juridical advantages, the evidential burden being on the plaintiff; and (iii) if so, the court had to balance the advantages of (i) against the disadvantages of (ii).

58.  The editors of Hong Kong Civil Procedure 2017 §11/1/12M observe in the application of Esquel Enterprises Ltd & Another v Tal Apparel Ltd & Another (above) in relation to proceedings in Hong Kong in respect of infringement in Hong Kong of Hong Kong intellectual property rights that the place of infringement is a “weighty factor” and that in such circumstances the Hong Kong courts “will of course be most reluctant to stay proceedings in respect of infringement in Hong Kong of Hong Kong intellectual property rights.”  In relation to intellectual property rights, some support for this can also be seen in Inverness Corporation & Ors v Magic Dreams Cosmetica Infantil, SL & Ors [1997] HKLRD 1377, 1386E–H (although in many respects that decision turns specifically on its own facts).

59.  Applying those principles to the present case, the fact the apprehended breach of the trade mark rights asserted by the plaintiff is in Hong Kong appears to be a very important factor.  In this context, the only trade mark rights I have in mind are those mentioned in the interim order.  The rights (if any) of the defendants to use those particular trade mark rights depends, in large measure, on rights which arise from a construction of the Company Agreement because the essential assertions of the defendants are that they have the consent of the plaintiffs, and, in particular, the 1^st and 2^nd plaintiffs to use those rights and also the defence known as the “own name” defence.  I see perfectly the contention of the defendants that in ventilating the disputes between the parties that witnesses who are resident in North America will almost certainly be requiredto attend in Hong Kong for trial.  Equally, I have not overlooked the proposition that the Company Agreement is an agreement founded on the Law of Texas.  It seems to me that in the event that it is necessary to construe that agreement, the primary focus is on the construction of a document in the English language.  If there are aids to construction which are dependent on Texas law as opposed to the plain meaning of the document, then I see no difficulty in this court being easily informed of that law in an appropriate and admissible form.  The Texan nature of the company agreement appears to me to be an obstacle which is more apparent than real.  That may, indeed, overstate the concept of apparent in this context.  In my judgment, at least for the determination of the rights which are the subject of the interim order to abide the event of the further hearing of this matter, the justice of the situation comes down firmly on the side of a Hong Kong court having jurisdiction.

RELEVANT PRINCIPLES CONCERNING THE GRANT OF AN INTERLOCUTORY INJUNCTION IN RELATION TO TRADE MARKS

Introduction

60.  I propose to outline the relevant principles in relation to the grant of an interlocutory injunction in relation to trade marks and then to apply the law to the factual issues which arise at this stage of the proceedings.

Trade marks

61.  Section 14(1) of the Trade Marks Ordinance, Cap 559 provides that the “owner of a registered trade mark has exclusive rights in the trade mark and those rights are infringed by use of the trade mark in Hong Kong without his consent.”  Section 14(2) provides that the acts constituting infringement of a registered trade mark, if done without the consent of the owner, are specified in section 18 but the acts of infringement are subject to exceptions.  Relevant to the principles to be applied in this case is the proposition in Kerly’s Law of Trade Marks and Trade Names 15^th edition, where, at §2‑003, the editors observe, “A trade mark is (or should be) a badge of origin in other words, it indicates the source of the trade origin of the goods or services in respect of which it is used.  A trade mark may do other things as well, but it must act as a badge of origin.”  Further, the editors of Kerly refer to L’Oréal v Bellure[2010] RPC 1 and, in this regard, the editors observe that the Court of Justice of the European Union gave a non‑exhaustive list of the functions of a trade mark, at least one of which must be liable to be affected by the use of a sign if there is to be a finding of infringement.[94]  The Court is quoted as saying:

“These functions include not only the essential function of the trade mark, which is to guarantee to consumers the origin of the goods or services but also its other functions, in particular that of guaranteeing the qualityof the goods or services in question and those of communication, investment or advertising.”

62.  There is an issue of consent in this case.  The issue of consent in the instant case is highly fact‑specific and it is sufficient for present purposes simply to recognise the relevance of consent. I will return to this in a moment.

63.  Under section 18(3):

“A person infringes a registered trade mark if–

(a) he uses in the course of trade or business a sign which is similar to the trade mark in relation to goods or services which are identical or similar to those for which it is registered; and

(b) the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public.”

The effect of this provision is that 3 facts must be shown.  These are:

(1) identical or similar goods or services are used in trade or business;

(2) there is a similarity between the registered mark and the sign alleged to be infringed; and

(3) there is likelihood of confusion on the part of the public.

64.  The concept of what constitutes a likelihood of confusion on the part of the public was discussed by the Court of Final Appeal in Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (No 2) (2016) 19 HKCFAR 20.  There, Gummow NPJ held that while a mere possibility of confusion is not enough, it is sufficient if the result of use by the defendant of the sign in question will be that a number of ordinary persons will entertain a reasonable doubt and be caused to wonder whether it might not be the case that the goods or services in respect of which the defendant’s sign is used have the same provenance as those in respect of which the trade mark is used.[95]  Gummow NPJ added:

“ 45. In considering this likelihood of confusion on the part of the public by use of a defendant’s sign, s.7(2) of the [Trade Marks Ordinance] requires the court to take into account ‘all factors relevant in the circumstances’. Uncontroversially, these will include the character of purchasers of the defendant’s goods or services, and the methods by which the goods or services are marketed.”

65.  The principles to be applied in the application of section 18(3) were authoritatively determined in Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (No 2) (above).  In that case, the Court of Final Appeal held that those principles were that the court looked to:[96]

(a) the likelihood of confusion must be appreciated globally, taking account of all relevant factors;

(b) the matter must be judged through the eyes of the average consumerof the goods or services in question, who is deemed to be reasonablywell informed and reasonably circumspect and observant, but who rarely has the chance to make direct comparisons between marks and must instead rely upon the imperfect picture of them he has kept in his mind, and whose attention varies according to the category of goods or services in question;

(c) the average consumer normally perceives a mark as a whole and does not proceed to analyse its various details;

(d) the visual, aural and conceptual similarities of the marks mustnormally be assessed by reference to the overall impressions created by the marks bearing in mind their distinctive and dominantcomponents, but it is only when all other components of a complex mark are negligible that it is permissible to make the comparison solely on the basis of the dominant elements;

(e) nevertheless, the overall impression conveyed to the public by a composite trade mark may, in certain circumstances, be dominated by one or more of its components;

(f) and beyond the usual case, where the overall impression created by a mark depends heavily on the dominant features of the mark, it is quite possible that in a particular case an element corresponding to an earlier trade mark may retain an independent distinctive role in a composite mark, without necessarily constituting a dominant element of that mark;

(g) a lesser degree of similarity between the goods or services may be offset by a greater degree of similarity between the marks, and vice versa;

(h) there is a greater likelihood of confusion where the earlier mark has a highly distinctive character, either per se or because of the use that has been made of it;

(i) mere association, in the strict sense that the later mark brings the earlier mark to mind, is not sufficient;

(j) the reputation of a mark does not give grounds for presuming a likelihood of confusion simply because of a likelihood of association in the strict sense; and

(k) if the association between the marks causes the public to wrongly believe that the respective goods [or services] come from the sameor economically‑linked undertakings, there is a likelihood of confusion.

66.  The first of the three requirements under section 18(3) is simply not in issue.  The marks are found on identical or similar goods or services used in trade or business.  The second requirement that there is a similarity between the registered mark and the sign alleged to be infringed requires, according to Kerly’s Law of Trade Marks and Trade Names (15^th edition)[97]  an evaluation of the visual, aural and conceptual similarity of the marks in question, including the overall impression given by the marks and, bearing in mind, in particular, their respective distinctive and dominant components.  Given the submission of the plaintiffs is that what is at stake in the instant case is a family of marks, there is authority for the proposition that the existence of a family of marks is capable of reinforcing each other and gaining a broader scope of protection than each individual mark might have.[98]

67.  As to the requirement that it be established that there is a likelihood of confusion on the part of the public under section 18(3) of the Ordinance, Kerly’s Law of Trade Marks and Trade Names (15^th edition)[99] suggests that this should be assessed globally to take into account all relevant factors including:

(1) the degree of similarity between the relevant marks;

(2) the degree of similarity between the relevant goods and services;

(3) the likely perception of the marks in the minds of the average consumer of the goods and services in question; and

(4) the degree of distinctness of the earlier mark.

This is consistent with section 7(2) of the Ordinance which provides that in considering the likelihood of confusion all factors relevant to the circumstances including whether the use is likely to be associated with a registered trade mark should be taken into account.

68.  In Specsavers International Healthcare Ltd v ASDA Stores Ltd[2012] FSR 555, the English Court of Appeal held that what has to be considered in assessing the likelihood of confusion from the use of a sign “the court must consider the matter from the perspective of the average consumer of the goods or services in question and must take into account all the circumstances of that use that are likely to operate in that average consumer’s mind in considering the sign and the impression it is likely to make on [the consumer].  The sign is not to be considered stripped of its context.”[100]

69.  Confusion might be direct or indirect: Guccio Gucci v Gucci[2009] 5 HKLRD 28, 59. Plainly, direct confusion might occur when the public confuses the sign on the mark in question.  Indirect confusion arises where the public makes a connection between the proprietors of the sign and those of the mark and confuse them.[101]

70.  The defendants contend that the provisions of section 19(3) of the Ordinance are relevant to the determination of the issues in this case.  This is on the basis that the matters outlined in connection with section 18 are established.      [102]
Section 19(3) provides:

“A registered trade mark is not infringed by–

(a) the use by a person of his own name or address or the name of his place of business;

(b) the use by a person of the name of his predecessor in business or the name of his predecessor’s place of business;

(c) the use of signs which serve to designate the kind, quality, quantity,intended purpose, value, geographical origin, time of production of goods or rendering of services, or other characteristics of goods or services; or

(d) the use of the trade mark where it is necessary to indicate the intended purpose of goods or services (for example, as accessories or spare parts),

provided the use is in accordance with honest practices in industrial or commercial matters.”

71.  The defendants submit that section 19(3) provides that a registered trade mark is not infringed by the use by a person of his own name provided that the use is in accordance with honest practices in industrial or commercial matters.[103]  Much of the law on this topic grew up around a previous iteration ofthe statutory provision for trade marks,[104] so the authorities on what is sometimes called the “own name defence” go back to earlier enactments.  In Parker‑Knoll Ltd v Knoll International Ltd [1962] RPC 265, 275, Lord Denning, delivering the leading speech in the House of Lords observed that the legislature:

“... has deliberately preserved the right of a man bona fide to use his own name as a trade mark in relation to his goods. His exercise of this right may cause confusion, but no matter. So long as he makes no false representation, he is safe. This right is not confined to his use of his own name as the name of his business (for example, over his shopfront) but also extends the use of it as a mark on his goods (for example, by putting it on the label). And ‘bona fide’ means what it says. It means honestly in good faith. So that the section means that it is no infringement for any person honestly to use his own name, in relation to his goods, so long as he has no intention to deceive anybody and no intention to make use of the goodwill which has been acquired by another trader.”

This passage was followed in Richemont International SA v Da Vinci Collections (HK) Ltd HCA 204/2006 where DHCJ Linda Chan held that the own name defence is very narrow and is only available for use of the defendant’s full namesubject to the proviso of honest practices.[105]  She held, following NAD Electronics Inc & Anor v NAD Computer Systems Ltd [1997] FSR 380, that in the context of a corporate name the own name defence would operate, in the context of the NAD Electronics case provided the defendant used NAD Computer Systems (the “Ltd” being of no moment) and not simply NAD.

72.  This matter was also considered in the English Court of Appeal in Asprey & Garrard Ltd v WRA (Guns) Ltd [2002] FSR 31.  The Court of Appeal appears to have considered this a somewhat obvious case because the trade name that the defendant wanted to use was William R Asprey, Esquire and the actual name of the company was WRA (Guns) Ltd. However, the Court of Appeal went on to observe[106] that “the defence has never been held to apply to names of new companies as otherwise a route to piracy would be obvious.  For the same reason a trade name, other than its own name, newly adopted by a company cannot avail it.”

73.  Perhaps more relevantly for present purposes, the honest practices component of the defence falls for consideration.  In this context, the concept of honest practices constitutes in substance the expression of a duty to act fairlyin relation to the legitimate interests of the trade mark owner.  If the mark is usedin a manner such as to give the impression that there is a commercial connection between the third party and the trade mark owner, or affects the value of the trade mark by taking unfair advantage of its distinctive character and repute the defence is not made out: Gillette Co v LA‑Laboratories Ltd [2005] 2 CMLRE 62 cited in Gucci v Gucci (above).[107]  Also relevant to this point is the observation of Deputy Judge Wong in Gucci when he says:[108]

“A defendant who has used his own name which is confusingly similar to the plaintiff’s registered trademark cannot escape liability for infringement by simply pointing to some steps that he might have taken to avoid confusion by the public, if the steps that are taken are either unlikely to be successful or are otherwise insufficient to prevent confusion. He has a duty to eliminate such confusion by taking effective steps which make it perfectly clear to the public that there is no connection between him and the proprietor of the mark ....”

Interlocutory injunction

74.  The modern principles governing the grant of an interlocutory injunction are derived from the American Cyanamid decision.[109]  That decision was, in its time, perceived as something of a sea change in determining what principles apply in determining whether or not to grant an interlocutory injunction.  That there have been a multitude of decisions explaining (and, in some respects, refining) those principles is a modest understatement.  The American Cyanamid decision recognises:

(1) The nature of the evidence proffered on an application for an interlocutory injunction is of necessity likely to be incomplete, in affidavit form and thus not tested by cross‑examination.

(2) What follows from this is that almost inevitably the court dealing with such an application is not in the position to fully resolve conflicts of evidence.

(3) Where, as is manifestly the case in the instant case, the court faces the decision as to whether or not to grant such an injunction upon contested facts, the court must recognise that it is doing so upon the basis that any resolution of the competing claims of the parties can only ultimately be resolved at trial.  Where there is a conflict of evidence the court has to be satisfied that there is a serious issue (or issues) to be tried.

(4) Where there is a serious issue to be tried, the critical concern of the courts in determining whether or not to grant such an injunction isan attempt to do justice between the parties on possibly incomplete information and sometimes at speed.  In this context, the court has to determine whether or not the claim on the part of the plaintiff could be adequately compensated in damages recovered at trial if that claim were resolved in the favour of the plaintiff.  In the event that the plaintiff’s claim could not adequately be compensated in damages, the court must weigh the interests of the defendant who might be prevented from exercising legal rights vested in the defendant for which the defendant could not be adequately compensated by any undertaking given by the plaintiff in damages if the uncertainty were resolved in the favour of the defendant at trial.  In this regard, the court weighing the competing concerns determines where lies what Lord Diplock described in the American Cyanamid case as “the balance of convenience”.  The phrase “the balance of convenience” has been recognised by subsequent authority as perhaps not perfectly apt for the interim resolution of competing rights, with sometimes huge economic consequences.  In NWL Ltd v Woods, the House of Lords recognised that what a court was required to do in this situation was balance the risk of doing an injustice.[110]  In Music Advance Limited v The Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD1041, it was held that:

“... the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutoryinjunction has been granted may lose or the party who has been refusedone, may win. The Court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong.” [111]

The focus, so it seems to me, of these two authorities is to recognise the risks and potential consequences of an attempt to do justice on evidence which has not been the subject of scrutiny at trial and may be, of necessity, incomplete.  As the court observed in Music Advance Limited v The Incorporated Owners of Argyle Centre Phase I (above) this is the fundamental principle.

75.  In determining whether there is a serious issue to be tried, there must, of necessity, be some evaluation of the strength of the competing factual claims of the parties.  While the authorities plainly recognise the difficulty in resolving such competing claims, the message of the authorities, so it seems to me,is that in the process of doing justice or avoiding injustice, the critical faculties of a court as to the competing factual claims must be firmly and clearly operating.  The test is and remains whether there is a serious issue to be tried.  The plaintiffs contend, citing Hengshi International Investments Limited v Bayspring International Ltd & Anor HCMP 1916/2015 that in determining whether there is a serious issue to be tried, it is irrelevant whether the court thinks that the plaintiff’s chance of success in establishing liability are 90% or 20%.  This derives from a judgment of the English Court of Appeal in Alfred Dunhill Ltd v Sunoptic SA [1979] FSR 337, 373 (judgment of Megaw LJ). The assertion of Megaw LJ sounds counter‑intuitive to me and it is, in my judgment, significant that Au Yeung J in Hengshi International Investments Limited v Bayspring International Ltd & Anor (above) cited in the very next paragraph in which she referred to these observations, the judgment of Ma J (as he then was) in Music Advance Limited v The Incorporated Owners of Argyle Centre Phase I (above) which seems to me to be far safer ground for any analysis of this issue.

76.  The plaintiffs have to establish that, in the absence of an appropriate injunction against the defendants, the plaintiffs would suffer irreparable harm which could not be adequately compensated in damages recoverable in the action.  In the decision of the English Court of Appeal in Fellowes & Son v Fisher [1976] QB 122, Browne LJ observed that the governing principle is that the court should first consider whether, if the plaintiff succeeds at trial, he would be adequately compensated by damages for any loss caused by the refusal to grant an interlocutory injunction.

“If damages ... would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiffs claim appeared to be at that stage.”

Relevantly, Browne LJ later observed in Fellowes & Son v Fisher (above):

“The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of his succeeding at the trial is always a significant factor in assessing where the balance of convenience lies; ...”

77.  Relevant to the issue of whether there has been irreparable harm is the issue of delay in issuing proceedings.  Equitable relief needs to be sought promptly.  The defendants submit that there has traditionally been a strong requirement when interlocutory injunctions have been sought, that the plaintiff must show that it has acted promptly and without delay.  The defendants submit,based on the observations of Rogers VP in King Fung Vacuum Ltd v Toto Toys Ltd[2006] 2 HKLRD 785 at §20 that “promptly” in the circumstances of interlocutory injunctions has been commonly understood to be a period of six weeks or so of unexplained delay and three months with an explanation given for the delay in making application for an injunction.  In this regard, the defendants cite King Fung Vacuum Ltd v Toto Toys Ltd [2006] 2 HKLRD 785 at §20 and Dorshare Ltd v Shun Pong Ltd HCA 1823/2012 §§13 – 16.  The learned editors of Hong Kong Civil Procedure 2017 §29/1/31 criticise the observations of Rogers VP when they observe:

“There does not appear to be a distinction between ex parte and inter partes applications in this judgment.”

The editors continue, speaking more generally:

“If the applicant does not apply promptly, then it is likely that he will not succeed in obtaining an injunction ex parte because his failure to move with real expedition is taken by the court as indicating a lack of any urgent need to grant relief ex parte ....”

78.  In Dorshare Ltd v Shun Pong Ltd (above), Anthony Chan J explained that that there are four reasons why delay can be fatal to an application for an interlocutory injunction.[112]  These were:

(1) Delay reflects the lack of irreparable damage.[113]  By this, I take Anthony Chan J as meaning that delay is capable of reflecting the lack of irreparable damage.  The reason for this is that if one looks at the 2^nd authority cited in this context by Anthony Chan J, (Wong Chung Ming Development Fund Co Ltd v Profit Surplus Ltd, CA, [2009] 3 HKC 19, §30) the passage from that judgment speaks about delay being relevant to the determination of whether there is an absence of irreparable damage.

(2) Delay is capable of causing prejudice to the party against whom the injunction is sought.

(3) Delay can render it unreasonable or unjust to grant an interlocutory injunction.

(4) A bad case of unexplained inordinate delay can constitute an abuse of process.

79.  Also of significance are the observations of Sakhrani J in Abbot GmbH & Co KG v Pharareg Consulting Co Ltd [2009] 3 HKLRD 524, which, together with King Fung Vacuum Ltd v Toto Toys Ltd (above) stand for the proposition that delay is a relevant factor which must be seen against the context of the dealings between the parties which led up to the institution of theproceedings.  In Abbot GmbH & Co KG v Pharareg Consulting Co Ltd, there were issues of whether the defendant in that action was prejudiced in its position or had in any way altered its position because of the delay.  In the result, Sakhrani J[114] adopted the observations of Eichelbaum J in Monsanto Co v Stauffer Chemical Co [1984] FSR 559, 571:

“ Further, and without wishing to detract from the proposition that equitable relief needs to be sought promptly, it is not sufficient for a defendant to show that the applicant has delayed unreasonably. It must be shown that because of that delay, it would be unreasonable to grant the remedy; that it has become practically unjust to do so. As Megarry J. said in Legg v. Inner London Education Authority [1972] 1 W.L.R. 1245:

‘What seems to me important is not so much the length of the delay per se, but whether the delay has in some ways made it unjust to grant the injunction claimed.’ (pp. 1259–1260).

And see Lindsay Petroleum Co. v. Hurd (1874) L.R. 5 P.C. 221, 240 and Spry, Equitable Remedies, 2nd Ed., pp. 405, 454—455.”

Sakhrani J concluded that the relevant test was whether the delay complained of had  made it unjust to grant the interlocutory injunction.  That, so it seems to me, is a far more sensible and context‑specific test than that which is implicitly propounded by the defendants which appears to lay emphasis on specific time period.  Plainly, delay is relevant to the issue of irreparable damage.  It must not be forgotten that in this context, the focus of the rules of equity is the doing of justice.  The observations of Sakhrani J inspired by Eichelbaum J best reflect that fundamental principle.

Discussion

80.  The case for the plaintiffs is that they are the owners of the relevant trade marks set out in my order.  They say that the defendants in proposing to market the Optimera Products in Hong Kong will violate their trade mark rights.  The plaintiffs contend that:

(1) identical or similar goods or services are used in trade or business;

(2) there is a similarity between the registered mark and the sign alleged to be infringing; and

(3) there is likelihood of confusion on the part of the public.

In this regard, the case of the plaintiffs is there is a likelihood of confusion on the part of the public such that the violation is apparent.  Looking at the packagesand the containers within the package, images of which are displayed in, amongstother places in the papers, Annex A of the submissions on behalf of the plaintiffs, they appear virtually identical save to say that one says it is Nerium Formula AD and the other one says Optimera Formula.  It is common ground that the former is manufactured by the plaintiffs and there is no objection to the use of the relevant trade marks on that formulation.  The other one, the Optimera Formula, is not manufactured by the plaintiffs. The plaintiffs’ case is that the use of the relevant trade marks on those products is objectionable.  There is no dispute between the parties as to the origin of that which is manufactured by the plaintiffs. There is no dispute that the Optimera Formula is not manufactured by the plaintiffs.  As I have noted the defendants contend that the public would regard the 1^st defendant as the source.  That does not take the matter very far.  The 1^st defendant is the distributor.

81.  The shape of the packaging and the containers is otherwise as it is to be presented for the Hong Kong market, for all practical purposes identical or very close to identical.  Applying the statutory provisions outlined above together with the discussion of the application of those provisions in Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (No 2) (above), a conclusion which would be open to a trial court is that viewing the matter through the eyes of the average consumer and looking at the matter as a whole, the origin of the Nerium Formula and the Optimera Formula was the same.  Given the use of the trade mark the implied assertion that a court of trial may find is commonality of manufacture, origin and quality.  That is the essence of the purpose of a trade mark.  I do not need to come to anything other than a provisional and interim view on that matter.  That provisional and interim view is that the products bearing the name Optimera Formula are well capable of being viewed as infringing.  The plaintiffs submit that in any event there is a serious issue to be tried in relation to that issue.  This view is justified.

82.  The defendants contend that they have the consent of the trade mark holder to use the relevant trade marks on the products bearing the assertion Optimera Formula.  As will have been seen from my summary of the facts asserted by the parties, this gives rise to 2 main areas of consideration.  The first is the construction of the Company Agreement.  The second is whether even if no consent was given by the holders of the relevant trade marks to use those by reason of the Company Agreement, there was a consent to use the relevant trade marks given in the course of discussions in what has been characterised by both parties as the rebranding exercise.

83.  Article 20.01(d)(i) of the Company Agreement defines intellectual property as including “Marks” which, for present purposes is capable of meaning“Trade Marks”.  Article 20.0l(d)(ii) is well capable of being interpreted as asserting, amongst other things, that the ownership of the intellectual property assets is with the 2^nd plaintiff.  Further, Article 20.0l(d)(viii) contains an assertion that the 2^nd plaintiff will grant perpetual licences to allow the 1^st defendant to utilise the intellectual property rights to the extent reasonably necessary for the marketing, distribution and sale of the Product Line.  That is capable of being interpreted as an undertaking in the future.  That might be considered to be consistent with Article 4.03 of the Agreement which contemplates the future execution of a Distribution and Licensing Agreement between NI and Nerium SkinCare to “... provide for the use of the intellectual property, formulation of the Product Line” et cetera and that such an agreement has never been made.  On that construction, the implication is that at least at the time of the Company Agreement a perpetual licence to the 1^st defendant to use the relevant trade marks had never come into being. The defendants accept that such an agreement has not been made.  A conclusion which is possibly open on these facts is that at least until the rebranding exercise the right to relevant trade marks remained with the 2^nd plaintiff.

84.  On the premise that at least until the rebranding exercise the relevant trade marks remained the property of the plaintiffs, the factual assertions of the plaintiffs and the defendants as to the so‑called rebranding exercise need to be considered.  The position of the plaintiffs is that the issue of allowing the defendants to use the intellectual property the subject of dispute was raised in the discussions concerning rebranding.  The position of the plaintiffs is that this was, in effect, to be agreed if (and only if) the plaintiffs manufactured the Optimera Products.  According to the plaintiffs, the matter was never resolved and it would follow from that position that, on that premise, the rights possessed by the 2^nd plaintiff in relation to the relevant trade marks was never altered.  The position of the defendants is that this is wholly untrue.  Indeed, the affidavit of Eric James Haynes makes the same assertion but points to a series of emails exchanged with employees of the plaintiffs which might be construed as accepting the position that at least permission to use the relevant trade marks had been passed to the defendants. The contention by Mr Haynes is that the 1^st and 2^nd plaintiffs did not object to the rebranding.  Mr Haynes exhibits as EH‑3 certain emails from the 1^st and 2^nd plaintiffs which do not express any mention of the condition upon which the 1^st and 2^nd plaintiffs contend was in existence.  No explanation has been provided as to why these emails were not in the affidavit of Mr Olson.  However, there is an issue as to whether it could properly be said that these emails were necessarily an appropriate forum or vehicle for making the point which Mr Haynes says is absent from them.  On a matter such as the handing over of possibly valuable intellectual property, I think that in resolving what is clearly a serious issue to be tried, the position of the CEO of the 1^st plaintiff might carry greater weight than that of his underlings.  However, that is a matter for trial.

85.  In support of the position of the defendants, Mr Olson makes the point that there is no documentation to support the position of the plaintiffs.  It is not a matter that I consider necessary for me to resolve at this stage.  Indeed, I consider that it could not possibly be resolved through affidavit evidence, but it would seem to me to be a tenable position on the part of the plaintiffs that given they were giving up possibly valuable intellectual property rights there might have been expected to be something which confirmed that they had givenup those rights rather than the opposite contention advanced by the 1^st defendant.  Further, although this is not pointed to by the plaintiffs it might be a tenable position that the position of the defendants implies that the plaintiffs were giving up such valuable rights for, in effect, possibly nothing other than for the possible increase in revenue from their 30% share company revenue from the sale of the Optimera Products as provided in the Company Agreement.  However, what I have to determine is not a final view of the matter but to determine at least on a provisional basis until the balance of the hearing of this application for an interlocutory injunction is concluded, that there is a serious issue to be tried in relation to the issue of consent.  In my view, at least on that provisional basis, there is a serious issue to be tried as to whether the plaintiffs consented to the 1^st defendant using the relevant trade marks.

86.  The case for the defendants is that they have an “own name” defence whereby they used their own name according to honest practices in industrial or commercial matters which use is permitted under the Ordinance.  The defendants go further and say that such use is “required” under the agreementbetween the 1^st and 2^nd plaintiffs and Mr Olson, known as the Company Agreement.  Implicit in their argument is that there is no serious issue (or issues) to be tried in this connection.

87.  The plaintiffs contend that the defendants using the “own name” defence under section 19(3) of the Ordinance is misconceived.  Again, they say that in any event there is a serious issue to be tried in relation to that issue.

88.  The defendants say that the name of their company is Nerium International and indeed, they point to Article 2.02 of the Company Agreement which, they say, mandates that in relation to the promotion of the Product Line they are required to use Nerium International.  In order to determine this issue, it is helpful to look at the Company Agreement.[115]  That provides:

“2.02 Name. The name of the Company is ‘Nerium International LLC’ and all Company business must be conducted in that name or such other names that comply with applicable law as the Manager may select from time to time.”

It is common ground that the Manager is Mr Olson.  In the same section of the Agreement, Article 2.05 defines the purposes of the company which are “the development, purchase, distribution and sale of all cosmetic and over the counter (OTC) products that have been developed or are in the future developed by Nerium and/or its affiliated company Nerium Biotechnology Inc ....”  In that context, Nerium means Nerium Skincare, Inc per the opening clause of the Agreement.  Article 2.05 also makes a reference to the “Product Line”.  Article 2.05 goes on to say that “such Product Line shall include, but not be limited to, those products identified on the attached exhibit C.  Exhibit C attached to the Agreement has 2 divisions but the only reference in that document is to products — and in some places, associated product — produced by Nerium or Nerium Biotech.  Quite where the Optimera Formula products — which are not produced by Nerium or Nerium Biotech — fit into Exhibit C is not entirely plain.  The argument of the plaintiffs appears to be that even if there is an obligation under Article 2.02 to use the name Nerium International it can only be in relation to products in the Product Line and those products are all manufactured by Nerium or Nerium Biotech.  If that is right, then the obligation asserted under Article 2.02 does not apply to the Optimera Formula products sold by Nerium International.

89.  The answer of the defendants is that there is nothing, whether under the Company Agreement or otherwise, which prohibits the 1^st defendant from marketing products other than those supplied by Nerium SkinCare, and under its own name, or under names or marks or get‑ups or other indicia in whichthe 1^st defendant owns the intellectual property, or as a placeholder or otherwise.  The plaintiffs say that Article 2.02 could not refer to the use of that name as a trade mark. That, so the plaintiff argues, would be inconsistent with the whole tenor of the Company Agreement.  The plaintiffs point to Article 2.02 with speaks of the use of Nerium International or “such other names that comply withapplicable law”.  Plainly, so the plaintiffs argue, the use of Nerium Internationalcould not comply with the applicable law being the trade mark law of Hong Kong.      

90.  The plaintiffs make the point that what the defendants have done is deliberately to give the consumers an impression that there is in fact a connection between the Nerium signs on the Optimera Formula products and the products of the plaintiffs so as to take an unfair advantage of the distinctive character and repute of the relevant trade marks owned by the plaintiffs.  In this regard, while there is, in one sense, a connection between the 2 products in that they both have a common distributor, the whole purpose of a trade mark is to make a statement about origin in the sense of manufacture.  The plaintiffs contend that they manufacture a distinctive product that, amongst other things, has a distinctive ingredient not found in the Optimera Formula.  In my opinion, for the purposes of these interim findings, there is clearly a serious issue to be tried in respect of this matter and, in my opinion, the position of the defendants is, at least by that standard, perhaps difficult to maintain.  Further, the obligation identified by the authorities including Gucci v Gucci (above) require the defendants to make it perfectly clear to the public that there is no connection between the products with the Optimera Formula and those by the plaintiffs. Indeed, there is, at minimum, a serious issue to be tried in respect of this and that comes against the background of the case for the plaintiffs that the defendantsare doing quite the opposite of trying to make a distinction: there is an inferenceopen in this case that they are improperly and dishonestly attempting to suggest that the products with the Optimera Formula have been made by and have the origin of the products manufactured by the plaintiffs.

91.  The case for the plaintiffs is that an interlocutory injunction is an appropriate remedy because if the defendants are allowed to use the trade mark rights of the plaintiffs then the plaintiffs will suffer irreparable damage and damage that cannot be compensated sufficiently by monetary damages.  The focus of the argument on the part of the plaintiffs is the erosion of what they callthe exclusivity and distinctiveness of the marks. It is contended by the plaintiffs that such an erosion would, in the context of this case, be difficult to assess in terms of monetary damages. While it seems to me that this might not always be the case in applications for interlocutory injunction in trade mark cases, it must be right in the context of the present case.  In my opinion, there is a serious issue to be tried particularly where the non‑offending and offending products are to be introduced into the Hong Kong market in a substantial way for the first time.  I can readily imagine cases (this is not one of them) where the 2 products had been present in the market for a substantial time in substantial quantity that this contention may not either have the same force or, indeed, any force at all.  While the evidence does suggest that there have been products manufactured by the parties available in the Hong Kong market, that seems to be as a result of resellers from outside Hong Kong shipping to Hong Kong.  What is at stake in the present case is not that form of marketing and what appears to be the position in the present case is a form of marketing which is, in many respects, the antithesis of efforts by resellers out of Hong Kong.  I note also in the affidavit of Eric James Haynes that he says that the defendants would suffer irreparable damage if they are not allowed to sell the products with the Optimera Formula in Hong Kong.  There is clearly a substantial issue to be tried in this regard.

92.  The issue of delay is raised by the defendants. They point to the marketing of products with the Optimera Formula in other jurisdictions and, in those jurisdictions, the plaintiffs or the relevant representatives of the plaintiffs have done nothing.  They also contend that the plaintiffs have been guilty of delay in the institution of Hong Kong proceedings.  In my opinion, the issue of delay in other proceedings is not matter of great moment for at least the interim order that I made to abide the further hearing in December this year. The matter conceivably has more force when it comes to a resolution of the interlocutory injunction following the December hearing.  In case I am wrong about that, I make the point that the essence of the evidence of the parties is that since at least some time in 2014 there had been something of a falling out of the parties and that falling out has been accompanied by efforts to resolve the differences which appear to have arisen between the parties. Indeed, it would appear that a substantial part of the differences involves arguments about the use of the intellectual property owned by the plaintiffs in the marketing of products with the Optimera Formula.  It seems to me that to the extent that delay in proceeding is attributable to good‑faith attempts at a commercial as opposed to a litigious resolution of the dispute between the parties that should not be held against the plaintiffs.  That is so even if those attempts carry with them elements of a preparedness not to litigate even where their rights might have been infringed.

93.  I also see the argument by the defendants that the distinctiveness of the plaintiffs’ products has already been diluted by marketing in other places such as Korea, Canada and Mexico.[116]  I do not think that even if this is right that this carries the day for matters specific to Hong Kong.  In my view, there is an unrealistic assumption in the case for the defendants in this respect: that such dilution as there may have been elsewhere automatically carries over to diminish the damage asserted by the plaintiffs in the specific instance of the Hong Kong market.  I readily accept that the globalism that is so much with us today renders markets in specific localities somewhat less distinct but, on the provisional basis appropriate for this interim order, I do not accept the kind of argument for, in effect, merger of identity which is at the heart of the argument for the defendants.

94.  The real issue seems to me to be in relation to time: whether the delay has in some ways made it unjust to grant the injunction claimed.  I do not think that it is unjust in this sense.  Unless I was prepared to accept completely to the exclusion of the case for the plaintiffs that there had been a complete resolution following the rebranding exercise of all of the disputes as between the parties in relation to the use of intellectual property, the defendants could not have been lulled into a false sense of security that all had been agreed between the parties.  I have already found that there is a serious issue to be tried in that regard.  At least in relation to the interim orders that have been made, I do not think that such delay as there has been would render it unjust to grant the interim relief that I granted.  As I have repeatedly stressed in relation to other issues upon which I have had to rule as a precondition for granting the interim restraint, my position with respect to that is wholly and utterly without prejudice to a decision following the December hearings.

FORTIFICATION OF USUAL UNDERTAKING AS TO DAMAGES

95.  The defendants seek a fortification of the undertaking as to damagesby giving security.  The principles governing such a course are well‑established.  It is for the defendant to show the likelihood of a significant loss arising as a result of the injunction and a sound basis for belief that the undertaking to make good any such loss will be insufficient.  The editors of Hong Kong Civil Procedure 2017 §29/1/24 make the point that the quantification of any loss would lie in the future but the court is nonetheless required to make an intelligent estimate of the likely amount of loss that would be caused by the grant of the injunction.  In such a cause, the court is required to take a broad view without necessarily resolving all arguments which have been raised regarding the amount to be ordered.

96.  I think that the analogy propounded by the defendants between the figures quoted for the Korean venture and Hong Kong is not sound. It is not necessarily a comparison of like against like.  Further, quite how the potentialmarket in the balance of the People’s Republic of China comes into this equation is something which, for the purposes of this interim order to abide the further hearing of this matter, I do not see.  Further, on an interim basis I am far from persuaded that the financial position of the plaintiffs, taken as a whole, is such that it would not be able to meet liabilities which might arise out of this interim order.  Plainly, the matter would need to be revisited on the further hearing of the matter because, in the event I was to find for the plaintiffs, we are potentially looking at a substantial amount of money being at stake.  I have fully taken into account the evidence on behalf of the defendants to the effect that setting up a marketing operation of the kind in contemplation in this case involves both time and the expenditure of resources.  On the face of it, in the event that the defendants were to succeed after the adjourned hearing, the plaintiffs would almost certainly be liable for such expenditure. The affidavit evidence as to what goes into setting up a multi‑level marketing operation is something I can readily accept.[117]  In my judgment, nevertheless, no case has been made out for fortification at this stage.  As with most components of this set of reasons, this is an issue that will have to be revisited in the event that I was to find for the plaintiffs in the principal action.

RECEPTION INTO EVIDENCE OF AFFIDAVIT OF ERIC JAMES HAYNES

97.  The defendants sought to introduce the affidavit of Eric James Haynes sworn on 28 September 2016 into proceedings on 29 September 2016.  Those representing the plaintiffs complained, validly in my opinion, as to the late service of the affidavit.  Mr. Haynes is the Chief Legal Officer of the 1^st defendant.  No explanation was offered nor is any explanation contained within the affidavit as to why it came into being as late as the day before the hearing.  What became apparent when the affidavit was examined it covered the following topics:

(1) The failure to oppose the launch of Optimera Products in Canada, Mexico and Korea — these products being launched with the “N” logo and under the Nerium name.

(2) The issue of whether the 1^st and 2^nd plaintiffs agreed unconditionally to the rebranding in 2014 and 2015.

(3) The launch of Nerium products in Korea.

(4) Events in relation to the litigation between some of the parties in Japan.

(5) Matters connected with the launch of Optimera Products in Hong Kong.

98.  Items (1) and (2) can be taken together.  The affidavit in this respect adds nothing to the affidavit of Mr Olson.  It is essentially a restatement in argumentative form as to what has been said before.  The failure on the part of the plaintiffs — particularly the 1^st and 2^nd plaintiffs — to take legal action in various jurisdictions is discussed in the affidavit of Mr Olson.  The position of Mr Olson so far as the consent by the 1^st and 2^nd plaintiffs to a rebranding exercise is restated.  The only thing that is new so far as that is concerned is an assertion in positive form that Mr Knocke was not present at the meeting at which the representatives of the 1^st and 2^nd plaintiffs agreed to the rebranding exercise in unqualified terms.  The exhibit EH‑1 purports to be a calendar entry for a meeting on 15 January 2015 between the 1^st defendant and the 1^st plaintiff.  An examination of that exhibit does not take the matter any further.  The author of that entry is not manifest from the document.  If it is Mr Haynes then it is simply, at most, a memory refreshing document.  It says nothing about the content of the meeting.

99.  Support for the contention that the 1^st and/or 2^nd plaintiffs would not be appropriate for manufacturing the Optimera Products is said to come from the fact that there are production problems with respect to the Nerium Products.  This appears to be the only new item of content and arises through exhibit EH‑2.  The first email in that exhibit makes an assertion that 100,000 items of a particular product were due as at the date of the email and only 7,300 units had been received.  Whether that supports the contention that Mr Haynes makes is, to put it politely, open to doubt.

100.  The observations of Mr Haynes in relation to the launch in Korea and the litigation in Japan underlined with clarity the undesirable consequences of filing the affidavit very shortly before the hearing.

101.  The observations of Mr Haynes as to the difficulties of setting up a multi‑layer marketing operation in Hong Kong or elsewhere is, hardly controversial.  Indeed, a better description might be self‑evident. That trouble and expense has been taken and incurred I do not have a great deal of difficulty in accepting.  This aspect of the affidavit is largely argument and adds little to the case.

102.  The basis upon which I admitted this affidavit in spite of the perfectly understandable prohibition against further evidence without leave of the court was perhaps generous.

CONCLUSION

103.  The principal focus of these reasons is to set out the basis upon which I made the interim orders on 29 September 2016.  This order is to abide the event of the further hearing of this matter in December 2016.  The judgments and observations I have made in these reasons as to the merits of this case must, of necessity, be understood to be provisional because the plaintiffs have not concluded their submissions and the defendants have not started theirs.