THE CHINESE INSTITUTE OF CERTIFIED FINANCIAL PLANNERS LTD v. ZHAO LIANG AND ANOTHER

HCA 951/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 951 OF 2010

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DECISION

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Introduction

1.  This is the hearing of the plaintiff’s application for summary judgment for infringement of trade mark.

2.  This action was commenced on 25 June 2010.  The plaintiff claims, inter alia, that the defendants have infringed its trade mark.  The defendants are not legally represented.  They filed a defence and counterclaim on 29 July 2010.  The plaintiff filed a defence to counterclaim on 29 December 2010.  The plaintiff took out an Order 14 summons on 27 January 2015.

3.  The 1^st‑named defendant, Mr Zhao Liang (趙良) (“Zhao”), appeared at this hearing on behalf of himself and the 2^nd‑named defendant, Ms Shen Xiao Xin (沈曉欣).  At the beginning of the hearing, I gave leave to the plaintiff to amend the Order 14 summons so that the application will be confined to its claim for infringement of trade mark only.  With the agreement of Mr Tai, counsel for the plaintiff, I also gave leave to the defendants to adduce a 公証書 (notary certificate) dated 3 March 2017, which refers to some documents downloaded from the Ministry of Civil Affairs of the PRC.

The plaintiff’s case

4.  The plaintiff is a company incorporated in Hong Kong on 20 October 2008 under the name “The Chinese Institute of Certified Financial Planners Limited中國註冊理財規劃師協會有限公司”.  It carries on the business of organizing and holding courses and seminars in relation to the financial market, in particular, in the field of Certified Financial Planner.

5.  On 12 June 2009, it applied to the Trade Marks Registry, Intellectual Property Department in Hong Kong for registration of the mark “CICFP The Chinese Institute of Certified Financial Planners 中国注册理财规划师协会” (“the Trade Mark”).  On 12 June 2009, the application was granted with registration number 301362186.

6.  Section 80 of the Trade Marks Ordinance (Cap 559) (“the TMO”) provides that:

“ In any proceedings relating to a registered trade mark, including proceedings for rectification of the register, the registration of a person as owner of a trade mark shall be prima facie evidence of the validity of the original registration and of any subsequent assignment or other transmission of it.”

7.  The plaintiff has never authorized any third party to use the Trade Mark.  It claims that the defendants infringed the Trade Mark as follows:

  (a) On or about 24 April 2009, the defendants registered a partnership under the name “The Chinese Association of Certified Financial Planners 中國註冊理財規劃師協會” (“the Infringing Trade Name”).

  (b) Since a date unknown to the plaintiff, a website by the domain name www.cncfp.org (“the Infringing Domain Name”) has been existing on the internet.  It is represented to be held in the name of 中国注册理财规划师协会; and中国注册理财规划师协会有限公司.  It also shows a logo containing the names “The Chinese Association of Certified Financial Planners Ltd 中国注册理财规划师协会” (“the Infringing Logo”).  The plaintiff believes that the Infringing Domain Name is held by the defendants.

  (c) Zhao also registered a domain name www.cfpchina.org.  The Infringing Logo also appears in that website.

8.  Section 18(3) of the TMO provides that:

“ 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.”

9.  The plaintiff claims that the Infringing Trade Name is strikingly similar to the Trade Mark because there are only minor and insignificant differences as follows:

  (a) In the English name, the word “Association” is used instead of “Institute”.

  (b) In the Chinese name, traditional characters rather than ‌ simplified characters are used; and “註” is used instead of “注”.

10.  The plaintiff makes a similar claim in respect of the Infringing Logo in the two websites mentioned above.

The defendants’ case

11.  Zhao invited me to consider the history of the matter; in particular, and most importantly, the fact that there is another company involved in this case.

12.  On 8 April 2005, a company was incorporated in Hong Kong with the name “China Certified Financing Programming Master Association Limited 中國註冊理財規劃師協會有限公司”.  Zheng Hui Wen (鄭惠文) (“Zheng”) used to hold all 100,000 shares in that company.

13.  On 28 June 2006, Zheng and Zhao signed a transfer of shares agreement (“股权转让协议书”):

  (a) Clause 2(1) provided that Zheng had registered in Hong Kong, inter alia, “中国注册理财规划师协会有限公司”.  

  (b) Clause 2(4) provided that Zhao agreed to buy 70% of the shareholding in, inter alia, “中国注册理财规划师协会有限公司”, from Zheng.

  (c) Under clause 3(4), Zheng agreed to authorize various entities,including “中国注册理财规划师协会有限公司”, to use permanently all trade marks relating to financial planning (“理财”) registered in his personal name, and would waive any claim in this respect; those trade marks, apparently all registered in the Mainland, were set out in a table attached to the agreement.  

  (d) Under clause 3(5), Zheng agreed that, after the transfer of the shareholding in these business entities, he would not in his personal name register any trade mark or intellectual property right in relation to financial planning (“理财”).

14.  On 12 July 2006, pursuant to the said agreement, Zheng transferred 70% of the shares in that company to Zhao.

15.  On 22 July 2006, the name of the company was changed to “The Chinese Institute of Certified Financial Planners Limited中國註冊理財規劃師協會有限公司”.  One would immediately note that this name was identical to the name of the plaintiff.

16.  On 3 December 2007, Zhao transferred to each of Ma Wei Dong (馬衛東) (“Ma”) and Zhu Cheng (朱城) (“Zhu”) 10% of the shares in that company (ie 20% in total).

17.  Zhao claims that, on 13 October 2008, Zhu, without informing him and Ma, changed the name of the company to “Chinese Financial Planner Institute Limited中華理財規劃師協會有限公司”.

18.  On 24 April 2009, upon discovering the said unauthorized change of name, Zhao procured the name of the company be further changed to “The Association of Chinese Financial Planning Limited中華理財業協會有限公司”.

19.  Zhao claims that the partnership formed in Hong Kong on 24 April 2009 by him and Shen, namely, the defendants in this case in the name of “The Chinese Association of Certified Financial Planners中國註冊理財規劃師協會” was intended to be a “subsidiary” of the above company.

20.  As mentioned, the plaintiff was incorporated on 20 October 2008 with the names “The Chinese Institute of Certified Financial Planners Limited中國註冊理財規劃師協會有限公司”.  Zhao asserts that the initial shareholders of the plaintiff were Zheng’s wife, namely Zhang Li Jing (張利敬) (“Mdm Zhang”), holding 9,000 shares; and Ng Chi Wai (伍志偉), holding 1,000 shares.

21.  The gist of the defendants’ defence is that the company in which Zhao still holds 50% interest with the present name “The Association of Chinese Financial Planning Limited中華理財業協會有限公司” is the entity which has the intellectual property right in the name “The Chinese Institute of Certified Financial Planners中國注冊理財規劃師協會”.  Zhao complains that the plaintiff had misappropriated the intellectual property right belonging to his company by, inter alia, registering the Trade Mark.

Analysis

22.  The legal principles concerning summary judgment applications are trite and need not be repeated here.

23.  At the hearing, Mr Tai appearing for the plaintiff agreed that, for the present purpose, the question is whether the matters raised by the defendants give rise to an arguable defence under section 11(5) of the TMO, which provides that:

“ A trade mark shall not be registered if, or to the extent that —

…

(b) the application for registration of the trade mark is made in bad faith.”

24.  Under section 53(1) of the TMO, an application for a declaration of invalidity of the registration of a trade mark may be made to the court.  There is no time limit in respect of an application to invalidate a registered trade mark on the ground that it was applied in bad faith (see section 59(1) of the TMO).

25.  Although there is no definition for the term “bad faith” in the TMO, it includes “dishonesty” and “some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area being examined” (深圳市德力康電子科技有限公司 v Joo-Sik-Hoi-Sa LG (LG Corporation) and another HCMP 881/2013 (26 March 2014, unreported), §25).  In Halsbury’s Laws of Hong Kong (2^nd ed) vol 34, [225.535] at p 118, the author cites examples of “bad faith” in footnote no 5.  One of those examples is SAXON Trade Mark [2003] FSR 704 where the applicant had no existing title to the mark and applied in order to interfere with the rights of people who did.

26.  An allegation that a trade mark had been applied for in bad faith is a serious allegation and tantamount to an allegation of a form of commercial fraud.  Such a plea should not be lightly made, and if made, should be distinctly alleged and proved.  The defendants have not pleaded a defence based on section 11(5)(b) of the TMO, or applied to invalidate the registration of the Trade Mark by the plaintiff on such ground.  However, as Mr Tai fairly accepted, one must bear in mind that the defendants are not legally represented.  In my view, the proper approach is to consider whether, on the evidence disclosed by the defendants, there is an arguable defence in this respect.  If the answer is in the affirmative, in the absence of any limitation period, it will be open to the defendants to amend the defence and counterclaim in due course by pleading its case properly and counterclaiming for an order that the registration of the Trade Mark by the plaintiff be invalidated.

27.  For the following reasons, I am satisfied that the defendants’ evidence has shown a triable issue that the Trade Mark was registered in bad faith.

28.  First, it is arguable that, under the transfer of shares agreement dated 28 June 2006, in particular, clause 3(5), Zheng had agreed with Zhao that he would not register any trade mark or intellectual property right involving the name “The Chinese Institute of Certified Financial Planners 中国注册理财规划师协会”, and that it was the company in which Zhao had acquired 70% interest from Zheng which should have the right to do so.

29.  Second, it is arguable that, it would be dishonest for Zheng to use an agent, or a corporate vehicle under his control, to register any trade mark bearing the above name in order to evade his personal obligations under said the transfer of shares agreement.

30.  Third, there is evidence suggesting that Zheng was related to the plaintiff.  There is unchallenged evidence that one of the two initial shareholders of the plaintiff was Zheng’s wife.  Zheng subsequently became the sole beneficial owner of the plaintiff.  Further, Zheng was once a director of the plaintiff; he resigned on 5 May 2014 and his wife was appointed as director on the same day.  His wife resigned on 17 November 2014.  In the light of such evidence suggesting a relationship between Zheng and the plaintiff, arguably, one may infer that Zheng knew, and even procured, the registration of the Trade Mark by the plaintiff.

31.  In considering whether the defendants have shown any arguable issue, I have also taken into account the fact that the deponent of the plaintiff's affirmations, Chan Nga Yan, was only appointed as director on 17 November 2014.  She does not purport to have any personal knowledge about the registration of the Trade Mark or the related matters raised by the defendants.

32.  While what I said above should be sufficient to dispose of the matter, I should add that there are two features in this case which reinforce my view that, as a matter of discretion, it is inappropriate to grant summary judgment.  First, the plaintiff is seeking summary judgment on its claim for infringement of trade mark only.  Mr Tai confirmed at the hearing that, irrespective of the outcome of this application, the plaintiff will not abandon its other claims such as passing off.  The facts concerning the claim for passing off are closely related to the claim for infringement of trade mark.  To grant summary judgment for the claim for infringement of trade mark will not result in much procedural economy.  Second, this action was commenced in June 2010.  It is unclear and difficult to understand why, if the plaintiff genuinely believed that this is a simple and straight forward case, it only applied for summary judgment in January 2015, and did not proceed with the application expeditiously resulting in the hearing being heard before me in April 2017 only.

Conclusion and orders

33.  The plaintiff applied for summary judgment after the defendants had filed their defence and counterclaim.  Although the defence and counterclaim was not well-drafted, it appears to me that this is a case where the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend within the meaning of Order 14, rule 7(1).

34.  In the circumstances, I shall order that the plaintiff’s application be dismissed with costs to be taxed if not agreed.

35.  Lastly, Mr Tai proposed that I should impose a condition on the defendants to amend their defence and counterclaim by including a declaration of invalidity of the registration of the plaintiff’s Trade Mark within 28 days.  I decline to do so.  I take the view that I should leave it to the defendants to decide how they wish to reformulate their case in the light of this decision and to make an appropriate application to amend their pleading accordingly.