CULTURECOM LTD AND ANOTHER v. JADE DYNASTY PUBLICATIONS LTD AND OTHERS

HCIP 64/2020

[2023] HKCFI 805

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 64 OF 2020

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REASONS FOR DECISION

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1.  This is the Plaintiffs’ application for interlocutory injunctive relief against the Defendants arising out of the Plaintiffs’ claims against the Defendants for: (a) infringement of the 1^st Plaintiff’s copyright in the comic series “小流氓” (“Little Rascals”); (b) the tort of passing off; and (c) infringement of the 1^st Plaintiff’s trade marks registered in Hong Kong. All the Defendants had provided undertakings to the court in terms of the interlocutory injunctive relief sought against them pending the determination of the Plaintiff’s application.

2.  In the substantive hearing on 15 September 2021, I allowed the Plaintiff’s application subject to some amendments in the terms. I now give my reasons for such decision.

BACKGROUND

3.  Mr Yan, SC, counsel for the Plaintiffs, has helpfully summarised the background of this case as follows.

(i)  The creation of the Little Rascals and the beginnings of the Culturecom Group (previously Jademan Group)

4.  At all material times, the 1^st Plaintiff carried on and still carries on a publishing and intellectual property licensing business.  It is the Plaintiffs’ case that, since 1983, the 1^st Plaintiff has been the owner of the intellectual property rights subsisting in and relating to the comic series “小流氓” (Little Rascals) (“Little Rascals”) and “龍虎門” (Dragon and Tiger Heroes) (“Dragon and Tiger Heroes”) (together referred to as “Dragon and Tiger Heroes Series”).  As further explained below, the Dragon and Tiger Heroes Series was first published under the name “小流氓” and was later re-titled as “龍虎門”, such that the latter is in fact a continuation of and forms the same series as Little Rascals.  Unless otherwise specifically stated, references to the Dragon and Tiger Heroes Series below refers to the entire series including Little Rascals.

5.  The 1^st Plaintiff is also the registered owner of the “” trade mark (Trade Mark No. 2001B00169AA) (“the 1^st Plaintiff’s Registered Mark”) and “” mark (Trade Mark No. 2001B02642) in Hong Kong.

6.  Since 2017, the 2^nd Plaintiff has been the exclusive licensee of the 1^st Plaintiff and has been granted the rights to use, apply and exploit the intellectual property rights and goodwill in respect of a number of comic series owned by the 1^st Plaintiff, including the Dragon and Tiger Heroes Series.

7.  The Plaintiffs are part of the Culturecom Group of companies (“the Culturecom Group”), which was founded by the 5^th Defendant in the 1980s under the name “Jademan” group until it changed its name in 1993 after the 5^th Defendant ceased to have any relations with the “Jademan” group under the circumstances described below.

8.  The 5^th Defendant is a comic artist, publisher and actor.  He was the creator of the Little Rascals, which centres around three recurring characters, namely 王小虎, 王小龍 and 石黑龍 (who are often referred to collectively as “龍虎三皇”) and featured stories about young people fighting for justice against gangsters and criminals.

9.  Little Rascals was first published in 1970 under the title “小流氓”.  In about mid-1970s, due to criticisms relating to the graphic violence depicted therein and in view of the imminent enactment of the Objectional and Publications Ordinance (now repealed and replaced by the Control of Obscene and Indecent Articles Ordinance), “小流氓” was re-titled as “龍虎門” from Issue No 99 in July 1975.    Despite the change in title, the story of Little Rascals remained unchanged and carried on in Dragon and Tiger Heroes.  In particular, the three main characters (龍虎三皇) have remained in the story and still lives on in the comic series to date.

10.  In 1983, the 1^st Plaintiff took over the comic book publishing business previously carried on by the 5^th Defendant.  It is the Plaintiffs’ case that, since then, the 1^st Plaintiff has been the owner of the intellectual property rights subsisting in and relating to a number of comics previously published under the 5^th Defendant’s publishing business, including the copyright subsisting in the artistic works of Little Rascals and Dragon and Tiger Heroes.  Although due to passage of time, the Plaintiffs have not been able to locate the exact agreement whereby the 5^th Defendant had assigned his rights in the Little Rascals to the 1^st Plaintiff.  However, as further explained below in this Reasons for Decision, it is obvious, from the history and conduct of the 1^st Plaintiff, the 5^th Defendant and his companies throughout the years, that the 1^st Plaintiff has obtained and is the rightful owner of the intellectual property rights in and relating to the Little Rascals.  It is also the Plaintiffs’ case that the 5^th Defendant and his companies (including the 1^st Defendant) are estopped from resiling from that position.

(ii)  The listing of the Culturecom Group & the 5^th Defendant’s exit therefrom

11.  On 30 August 1985, the 1^st Plaintiff changed its name to “JADEMAN (HOLDINGS) LIMITED 玉郎機構有限公司”.  In preparation for the listing of the shares of the 1^st Plaintiff on the Hong Kong Stock Exchange, the Jademan group of companies (“Jademan Group”) was formed in 1986, with the acquisition by the 1^st Plaintiff of various companies to provide a unified structure for the 1^st Plaintiff’s publishing interests.

12.  On 12 August 1986, the shares of the 1^st Plaintiff were listed on the Main Board of the Hong Kong Stock Exchange.

13.  Shortly before the shares of the 1^st Plaintiff were listed, on 16 July 1986, the 1^st Plaintiff and the 5^th Defendant entered into a service agreement pursuant to which the 5^th Defendant was appointed as the chief executive and managing director of the 1^st Plaintff from 1 July 1986 to 30 June 1991.

14.  In 1989, the 5^th Defendant was arrested by the Commercial Crimes Bureau on suspicion of having committed offences arising from his conduct of affairs of the 1^st Plaintiff.  The 5^th Defendant was eventually charged with various offences of false accounting under the Theft Ordinance and he resigned as Chairman and director of the 1^st Plaintiff on 14 June 1989.

15.  On 10 January 1991, the 5^th Defendant was convicted of two counts of conspiracy to defraud the 1^st Plaintiff, its shareholders and creditors, and was sentenced to 4 years’ imprisonment.  The 5^th Defendant was eventually released from prison in 1993.  Following his conviction and imprisonment, in or around 1991, the 5^th Defendant’s shares in the 1^st Plaintiff were acquired by Sing Tao Holdings Limited and Ms Sally Aw Sian.  Since then, the 5^th Defendant ceased to have any relations with the Jademan Group.

16.  In 1993, Culturecom Holdings Limited (“Culturecom Holdings”) was established and replaced the 1^st Plaintiff as the listed corporate vehicle on the Hong Kong Stock Exchange.  At around the same time, the 1^st Plaintiff changed its name to CULTURECOM LIMITED (文化傳信有限公司) and became an indirectly wholly-owned subsidiary of Culturecom Holdings, and the group came to be known as the Culturecom Group.

17.  In or around late-1998, Sing Tao Holdings Limited sold its shares and interest in the Culturecom Group to ViaGold Capital Limited, which then became the largest shareholder of the Culturecom Group.  At the time, due to the rising popularity of the internet and other forms of entertainment being introduced into the market, there was a general decline in interest in print media, including comic books.  Although the 1^st Plaintiff remained as the leading comic books publisher in the market and Dragon and Tiger Heroes was still the most popular comics series in Hong Kong, it was nevertheless decided that the 1^st Plaintiff would gradually shift its focus away from the actual production, printing and sales of print media, including in particular comic books, to licensing others to produce and market comic books based on the 1^st Plaintiff’s intellectual property rights.

(iii)  Events after the 5^th Defendant’s release from prison

18.  After his release from prison in 1993, the 5^th Defendant re-joined the comic books industry and began publishing a number of new comic series.  For the purposes of the operation of his new publishing business, the 5^th Defendant had set up a number of companies, including the following:

(i)     the 1^st Defendant, which is a wholly-owned subsidiary of Jade Dynasty Holdings Limited (“JDH”), a company in which the 5^th Defendant had held a substantial interest;

(ii)    TOPAZMAN HOLDINGS LIMITED黃玉郎集團有限公司 (“THL”), of which the 5^th Defendant was the sole shareholder, company secretary and a director;

(iii)   YUK LONG CREATION LIMITED 玉郎創作有限公司 (“YLC”), which was dissolved by deregistration on 16 December 2005 and at which time the 5^th Defendant held 50% of the issued and paid up shares in and the other 50% of the shares being held by JDH;

(iv)   JADE DYNASTY PUBLICATION COMPANY LIMITED 玉皇朝圖書有限公司 (“JDPCL”) which is a wholly owned subsidiary of the 1^st Defendant and of which the 5^th Defendant is a director and company secretary; and

(v)    YULANG GROUP LIMITED 玉郎集團有限公司 (“YGL”), of which the 5^th Defendant is a director, the company secretary and a shareholder.  The 5^th Defendant directly holds 3,000 of the 300,000 issued and paid up shares in YGL, the other 297,000 shares being also held by him indirectly through THL.

19.  In around 1995, when the 1^st Plaintiff published, marketed and sold a 龍虎門經典畫集 which featured a collection of artwork and covers from various issues of Dragon and Tiger Heroes (including Little Rascals) dating from 1970 to 1995 (“the 1995 Commemorative Book”), the 5^th Defendant instructed his solicitors to write a letter to the 1^st Plaintiff alleging copyright infringement.  The 1^st Plaintiff instructed its solicitors to reply refuting the 5^th Defendant’s allegations and claims.  The 5^th Defendant did not reply to such letter, nor did he take any action to try to prevent the further sale of the 1995 Commemorative Book.  In the end, all copies of the 1995 Commemorative Book were released in 1995 and sold out in the same year.

20.  The 5^th Defendant does not dispute the matters set out in the previous paragraph save to say that he had no recollection of receipt of the letter from the 1^st Plaintiff’s solicitors and to claim that he did not follow up because it was a one-off incident and lasted only for a short period of time.

21.  In around 1999, a company controlled by or related to the 5^th Defendant, NEW TIME MUSICAL WORLD LIMITED (“NTMWL”), published and began to distribute a “《小流氓》豪華紀念集” which consisted of 2 volumes of reprints of Issue Nos 1 to 8 of the Little Rascals comics (“the 1999 Commemorative Books”).  Upon learning of the release of the 1999 Commemorative Books, the 1^st Plaintiff immediately instructed its solicitors to issue a cease and desist letter to NTMWL demanding it to cease publication and distribution of the 1999 Commemorative Books.  Thereafter, the 1999 Commemorative Books were withdrawn from distribution and there was thereafter no further attempt to publish reprints of any further past issues of the Little Rascals comics.

22.  In respect of this incident, the 5^th Defendant claims to have no recollection of having received the letter from the 1^st Plaintiff’s solicitors, but it is clear from the extracts from the publications exhibited by him to his affirmation that he must have received such letter.[1]  Otherwise, there would not have been any reason for him to have tried to respond to the 1^st Plaintiff’s claims in those extracts.

(iv)   The 5^th Defendant’s cooperation with the 1^st Plaintiff for the publication of the Dragon and Tiger Heroes comics

23.  In around 1999, through their memberships to the Hong Kong Comics Federation (香港漫畫聯會), the staff of the controlling shareholder of the Culturecom Group became acquainted with the 5^th Defendant.  At around the same time, the 5^th Defendant was planning to seek a listing of the shares of his company on the Hong Kong Stock Exchange.  Towards this end, and with a view to improve the image of his company by adding a major comic series to his company’s portfolio, the 5^th Defendant, through a middle-man, approached the 1^st Plaintiff to discuss the possibility of obtaining a licence from the 1^st Plaintiff so that he could produce and publish the Dragon and Tiger Heroes comics (which had continued to be produced and published by the 1^st Plaintiff after the 5^th Defendant had been imprisoned and had left the Jademan Group).

24.  There is an issue as to who actually initiated the cooperation.  However, as explained by Mr Chen Man Lung who is a director of the 2^nd Plaintiff, the very high minimum guarantee provided for under the THL Agreement (as defined in the next paragraph) tends to suggest that it was in fact the 5^th Defendant who was keen to obtain the licence from the 1^st Plaintiff and had sought to cooperate with the 1^st Plaintiff and not vice-versa.  In any event, who actually initiated the contact is quite unimportant.  Much more important is the fact that such contact led to cooperation between the Plaintiffs and the 5^th Defendant and his companies and, most critically, a period of over 20 years when the 5^th Defendant and his companies repeatedly represented and acknowledged that the 1^st Plaintiff is the owner of the intellectual property rights in and in relation to the Little Rascals as mentioned below.

25.  It is the Plaintiffs’ case that, during the discussions between the parties which involved discussions of various possible ways of cooperation between the 1^st Plaintiff and the 5^th Defendant, the 5^th Defendant had expressly assured the 1^st Plaintiff that he would stop producing and distributing Little Rascals publications and products without the 1^st Plaintiff’s consent or licence, and it was eventually agreed that the 1^st Plaintiff would licence the 5^th Defendant’s company to produce the Dragon and Tiger Heroes comics, which led to the signing of a Co-operation and Licence Agreement on 13 March 2000 between the 1^st Plaintiff and THL (“the THL Agreement”).

26.  The terms of the THL Agreement reflect the agreed arrangement mentioned in the preceding paragraph.[2] Further, THL expressly acknowledged that the 1^st Plaintiff is the owner of all intellectual property rights subsisting in the Dragon and Tiger Heroes and the comic characters.

27.  Pursuant to the THL Agreement, THL took over the production, publication and distribution of the Dragon and Tiger Heroes Series as from Issue No 1268.

28.  The licensing arrangement was considered to be a mutually beneficial arrangement for both the 1^st Plaintiff and the 5^th Defendant.  With the publication and sales of the Dragon and Tiger Heroes comic books, the 5^th Defendant would enjoy a substantial boost in the turnover figures and profile of the company which the 5^th Defendant was planning to list.  At the same time, such arrangement yielded a sizeable income for the 1^st Plaintiff without it having to incur the not inconsiderable costs involved in the actual production, printing and distribution of the Dragon and Tiger Heroes comics.  It was also a further step towards the implementation of the Culturecom Group’s planned move away from the production and sales of comic books and towards the licensing of others to produce and market comic books based on the Culturecom Group’s intellectual property rights.

29.  In Issue No 1281 of Dragon and Tiger Heroes released on 3 June 2000, which was published under the name “新著龍虎門” not long after THL took over the production, publication and distribution of the Dragon and Tiger Heroes Series under licence from the 1^st Plaintiff, the fact that Dragon and Tiger Heroes is a continuance of the Little Rascals was expressly acknowledged in a passage contained therein.[3]

30.  For more than 20 years from 13 March 2000 until 25 May 2020, the 5^th Defendant had, through different companies, been granted by Plaintiffs the exclusive licence to produce, publish and distribute the Dragon and Tiger Heroes under successive licence agreements with the Plaintiffs.  Similar to the THL Agreement, all the licence agreements contained provisions whereby the licensees (i.e. the 5^th Defendant’s companies, including the 1^st Defendant) had expressly acknowledged the 1^st Plaintiff as the owner of the intellectual property rights subsisting in and relating to the Dragon and Tiger Heroes.

(v)  The 5^th Defendant and his companies’ repeated acknowledgements and representations of the 1^st Plaintiff’s ownership of the intellectual property rights in the Little Rascals for 20 years from 2000 to 2020

31.  For 20 years until 2020, the 5^th Defendant and his companies, including the 1^st Defendant, had acknowledged and represented that the 1^st Plaintiff, not the 5^th Defendant, at all material times owned and owns the intellectual property rights relating to the Little Rascals:

(i)     In the discussion leading up to the signing of the THL Agreement, the 5^th Defendant had expressly assured the 1^st Plaintiff that he would stop producing and distributing Little Rascals publications and products without the 1^st Plaintiff’s consent or licence.[4]

(ii)    There were express copyright notices (stating that the 1^st Plaintiff was the copyright owner) in the following publications and the Defendants did not raise any objection in relation to the same:

(a)  the 1^st Plaintiff’s production in 2000 of a collection of past issues of Little Rascals reproduced in CD-ROM format to mark the 30^th anniversary of the first publication of Little Rascals;

(b)  the 1^st Plaintiff’s production in 2001 of a collection of re-prints of all 98 past issues of Little Rascals (小流氓珍藏文庫版);

(c)  the production of two of the 5^th Defendant’s companies, YLC and the 1^st Defendant, in 2001 of a box set of figurines of the 3 main characters from the Little Rascals “小流氓 龍虎3皇REAL ACTION HEROES 1:6 活動人形套裝”;

(d)  the 1^st Plaintiff’s production in 2006 of the 2^nd edition of the 小流氓珍藏文庫版 Collection to mark the 35^th anniversary of the first publication of Little Rascals; and

(e)  The 1^st Defendant’s production in 2012 of a special edition (紀念號) of Dragon and Tiger Heroes Issue No 1900 (with which free Little Rascals commemorative cards were supplied) to make the 1900^th release of the Dragon and Tiger Heroes.

(iii)   In 2005, the 1^st Plaintiff, the 1^st and 5^th Defendants entered into a film licence agreement with Mandarin Films Limited (東方電影出品有限公司) (“MFL”) under which it was agreed that the 1^st Plaintiff would grant to MFL the exclusive right to produce and shoot a film based on the Dragon and Tiger Heroes Series (“the 2005 Film Licence Agreement”).  The Plaintiffs claim that The 2005 Film Licence Agreement was in fact entered into at the request of the 1^st Defendant and MFL to extend the period of the licence which had initially been granted by the 1^st Plaintiff under a licence agreement dated 31 December 2001 entered into between the 1^st Plaintiff, YLC and MFL.   Further, it was Mr Wong Pak Ming of MFL (and who was, for a time, a director of the 1^st Defendant) who had proposed that an English contract (to be prepared by MFL’s lawyers) should be signed so that MFL could work with their investors from the United States.  In the 2005 Film Licence Agreement, not only did the parties thereto expressly acknowledge the 1^st Plaintiff to be the owner of all intellectual property rights (including copyright) in the Dragon and Tiger Heroes Series, the 5^th Defendant himself had personally and expressly represented, warranted and confirmed that the 1^st Plaintiff had duly and lawfully acquired all the intellectual property rights in the Dragon and Tiger Heroes Series going back to 1970 (which therefore included Little Rascals) and that he had not otherwise assigned, incumbered, transferred or otherwise disposed of such intellectual property rights and would not do so.

(iv)   In 2008, the 1^st Defendant had acted as the 1^st Plaintiff’s agent in respect of a licence agreement which was entered into between the 1^st Plaintiff, the 1^st Defendant and G.O.D. Ltd (“GOD”) on 11 July 2008, under which the 1^st Plaintiff granted to GOD the right to produce and distribute derivative products based on Little Rascals and Dragon and Tiger Heroes (“the GOD Licence Agreement”).  It was expressly acknowledged in the GOD Licence Agreement that the 1^st Plaintiff is the owner of the copyright subsisting in the Little Rascals and Dragon and Tiger Heroes comics.   Pursuant to such agreement, GOD produced various products including T-shirts, notebooks, stickers, wallets, postcards, keychains, coffee mugs, bags, shorts and hats.  The products produced bore the names or marks “小流氓”, “龍虎門” and representations of some of the characters from the Little Rascals comics, including the three main characters (龍虎三皇).  They also featured the crossover tags which stated that the copyright belongs to the 1^st Plaintiff.

(v)    In 2010, the 1^st Defendant approached the 1^st Plaintiff to seek a licence from the 1^st Plaintiff to publish a 龍虎門封面大全集 (which would contain copies of the covers of Issue Nos 1 to 1280 of the Dragon and Tiger Heroes Series).   Under the licence agreement dated 22 July 2010 which was entered into (“the 2010 Covers Collection Licence Agreement”), the 1^st Plaintiff was expressly stated to be the owner of copyright in the entire Dragon and Tiger Heroes Series including Little Rascals (Issue Nos 1 to 1280).[5]   There were also copyright notices on the last page and back cover of the 龍虎門封面大全集 (published pursuant to the 2010 Covers Collection Licence Agreement) stating that the copyright therein belongs to the 1^st Plaintiff.

(vi)   In addition to the aforesaid licensing agreements and arrangements, the 1^st Plaintiff had also entered into the following licence agreements with other third parties licensing them to produce and market re-print versions and derivative products based on the Little Rascals: (a) the agreement with UMA (HONG KONG) LIMITED on 1 September 2006 for the right to produce a “小流氓速讀” book series; (b) the agreement with Wu & Wu on 1 June 2009 for the right to produce wallets and messenger bags using two pictures that had been featured in the Little Rascals; (c) the agreement with Handheld Culture Limited on 28 July 2010 for the right to publish a number of comics, including “小流氓文庫版(1至10期)”, through mobile application softwares for distribution through digital stores; (d) the agreement with Hong Kong Filmmakers Limited on 5 February 2013 for the right to use a cover image of Issue No 72 of the Little Rascals in a documentary movie; (e) the agreement with Television Broadcasts Limited on 11 April 2013 for the right to use the cover images of a number of comics, including the Little Rascals and Dragon and Tiger Heroes, in a television programme; (f) the agreement with TATO Press Limited and Ever Light Asia Ltd on 15 July 2013 for the right to produce derivative products based on, inter alia, the Dragon and Tiger Heroes Series; (g) the agreement with Creation Cabin Limited on 3 June 2015 for the right to produce and publish “《龍虎門》 永遠經典合訂本”, i.e. re-prints of past issues of the Dragon and Tiger Heroes Series.  There were clauses in these agreements acknowledging that the 1^st Plaintiff is the owner of the intellectual property rights associated with the Little Rascals and Dragon and Tiger Heroes comics, and there were copyright notices in some of the goods and publications produced pursuant to these agreements.  Considering the 5^th Defendant’s position in the trade and his relationship with the Plaintiffs, it is difficult for the Defendants to deny knowledge of these matters and yet they raised no objection to such assertions of rights by the Plaintiffs.

(vi)  The breakdown of the relationship between the Plaintiffs and the 1^st and 5^th Defendants

32.  According to the Plaintiffs, from around 2012, the 1^st Defendant had on numerous occasions sought the 1^st Plaintiff’s agreement for reductions in the minimum guarantees under the licensing agreements relating to the publication of the Dragon and Tiger Heroes.  The 1^st Plaintiff had acceded to the 1^st Defendant’s requests and agreed to such reductions.  However, notwithstanding the successive reductions in the minimum guarantees, the 1^st Defendant had repeatedly delayed or defaulted in paying royalties or licence fees due under the various licence agreements relating to the Dragon and Tiger Heroes Series.  The 1^st Defendant had repeatedly sought extensions to provide payment thereto and would often tender post-dated cheques which the Plaintiffs were sometimes requested to further defer cashing.   On one occasion, the 2^nd Plaintiff instituted legal action (HCA 5831/2020) against the 1^st Defendant to claim for the outstanding royalties.

33.  The 2^nd Plaintiff eventually terminated the licencing agreement with the 1^st Defendant on 25 May 2020.  As such, the last issue of the Dragon and Tiger Heroes comics (Issue No 2326) published by the 1^st Defendant was released on 21 May 2020.

(vii)  The Defendants’ alleged wrongful and infringing activities

34.  A week later, JDPCL started publishing a new comic series under the title “龍虎5世之3世仇” (“Dragon and Tiger V”).  However, this new comic series was not very popular and had low book sales.

35.  In Issue No 8 of Dragon and Tiger V released on 16 July 2020, it was stated that free copies of reprints of Little Rascals Issue Nos 1 and 2 would be given away with Issue Nos 9 and 10 of Dragon and Tiger V. Upon learning of this, on 22 July 2020, the 1^st Plaintiff, through its solicitors, issued a letter to the 5^th Defendant warning him that his intended course of action would infringe the 1^st Plaintiff’s intellectual property rights in the Little Rascals.  On the following day, the 1^st Plaintiff posted a declaration on its Facebook page, stating that it is the owner of the trade marks of and the copyright subsisting in Little Rascals and Dragon and Tiger Heroes.  Ultimately no free copies of Little Rascals were given away with Issue Nos 9 and 10 of Dragon and Tiger V.

36.  Thereafter, there was a meeting on 6 August 2020 between Mr Kwan Kin Chung (“Kwan”), who is a director of both the 1^st and 2^nd Plaintiffs, and the 5^th Defendant.  At the meeting, Kwan and the 5^th Defendant discussed payment of the outstanding royalties due from the 1^st Defendant.  The 5^th Defendant also asked for permission to give away free copies of Little Rascals Issue No 1 with his Dragon and Tiger V comics, in response to which Kwan informed him that he must enter into a formal licence agreement with the Plaintiffs in order to do so and that the Plaintiffs would be prepared to charge only a nominal fee for the licence.  However, neither the 5^th Defendant or his staff followed up on this matter with the Plaintiffs.

37.  In the meantime, in around July to August 2020, the Plaintiffs decided to publish and started to make preparations for the publication of a collection of the covers of past issues of Little Rascals (小流氓經典封面紀念畫集) (“the 2020 Covers Collection Book”) and re-prints of past issues of the Little Rascals comics (復刻版 小流氓) (“the 2020 Re-print Little Rascals”) to mark the 50^th anniversary of the first publication of Little Rascals.  On 23 October 2020, the 1^st Plaintiff posted an announcement on its Facebook page announcing the impending publication and release of the 2020 Covers Collection Book on 5 November 2020.

38.  On the same day as the 1^st Plaintiff’s Facebook post, the 1^st Defendant’s solicitors replied to the 1^st Plaintiff’s letter from 3 months ago dated 22 July 2020, stating that the 1^st Defendant was an authorised licensee and publisher of all copyrighted works under the “小流氓” mark by the 5^th Defendant and that the latter intended to initiate revocation proceedings on the grounds of bad faith and non-use against the 1^st Plaintiff’s Registered Mark.

39.  On 27 October 2020, the 5^th Defendant filed an application to revoke the 1^st Plaintiff’s Registered Mark on the sole ground of non-use.  The application is still pending.

40.  Thereafter, despite warnings from Plaintiffs’ solicitors, the Defendants engaged in the following series of activities:

(i)     On 29 October 2020, JDPCL, together with the 2^nd and 4^th Defendants, released Dragon and Tiger V Issue No 23 to which a free copy of a reprint of Issue No 1 of Little Rascals (which was given the title “復刻版小流氓第1期”) was attached.  Dragon and Tiger V Issue No 23 also featured an announcement of the impending publication and release on 31 October 2020 of a collection of the covers of the past issues of Little Rascals entitled “正宗小流氓封面集” (“the Defendants’ Covers Collection”) and another announcement of the impending publication of a reprint of Issue No 92 of Little Rascals entitled “石黑龍收藏版” which would be available for sale exclusively at the 4^th Defendant’s shop from 31 October 2020 (“the Publication Announcement Page”).

(ii)    On 30 October 2020, the 5^th Defendant posted a copy of the Publication Announcement Page on his personal Weibo Account.  On the same day, he also published an announcement purporting to assert his ownership in the intellectual property rights in the Little Rascals (“the 2020 October Announcement”).

(iii)   The Defendants’ Covers Collection was released on the following day on 31 October 2020.  It contained reprints of the covers of Issue Nos 1 to 98 of Little Rascals.  The 2020 October Announcement was also reproduced therein.

(iv)   Thereafter, on 5 November 2020, a free copy of a reprint of Issue No 2 of Little Rascals, which was entitled “復刻版小流氓” comic (“the Free 復刻版小流氓 Issue 2”), was given away along with Dragon and Tiger V Issue No 24.  In his “玉郎一週” column therein, the 5^th Defendant stated that he and his companies had the right to publish, print and distribute the Defendants’ Covers Collection and the Free 復刻版小流氓 Issue 2.

(v)    On 12 November 2020, JDPCL, together with the 2^nd to 4^th Defendant, published and released a set of comics comprising re-prints of Issue Nos 1-8 of Little Rascals (“the Defendants’ Reprint Little Rascals Issues 1 to 8”).

(vi)   Further, on the same day, a free copy of Issue No 3 of a “復刻版小流氓” comic (“the Free 復刻版小流氓 Issue 3”), was given away along with Dragon and Tiger V Issue No 25.  In his “玉郎一週” column therein, the 5^th Defendant stated that he is the owner of the copyright in Little Rascals and that he and his companies had the right to publish, print and distribute the Free 復刻版小流氓 Issue 3 and the Defendants’ Reprint Little Rascals Issues 1 to 8.

(vii)  On 19 November 2020, a free copy of Issue No 4 of a “復刻版小流氓” comic was given away along with Dragon and Tiger V Issue No 26. In his “玉郎一週” column therein, the 5^th Defendant stated that he and his companies had the right to publish, print and distribute the Defendants’ Reprint Little Rascals Issues 1 to 8 and announced a second collection of reprints of Issue Nos 9 to 16 of Little Rascals would soon be published.

(viii) In his “玉郎一週” column in Dragon and Tiger V Issue No 27 which was released on 26 November 2020, the 5^th Defendant claimed that due to ongoing litigation, JDPCL would temporarily cease to give away free copies of reprints of Little Rascals and postpone its plans to publish the second collection of the reprints of Issue Nos 9 to 16 of Little Rascals.

41.  There is no serious dispute that JDPCL has been acting under the direction and control of the 5^th Defendant. Further, acting under the direction and control of the 5^th Defendant, JDPCL has worked together with the 2^nd to 4^th Defendants in conducting the aforesaid activities and in carrying out the “attacks” on the Plaintiffs’ business since October 2020.  The 5^th Defendant has also, on numerous occasions, stated himself to be the owner of the intellectual property rights subsisting in and relating to Little Rascals.

42.  On 5 November 2020, the Plaintiffs released the 2020 Covers Collection Book with a mini-version of the 2020 Re-print Little Rascals Issue No 1 attached as a gift.  However, as a result of the Defendants’ alleged wrongful activities, the Plaintiffs were forced to halt their plans in releasing the 2020 Re-print Little Rascals.

43.  In this application, the Plaintiffs are seeking for interlocutory injunctive relief to stop the Defendants from continuing the alleged wrongful activities.  I would not repeat these principles here.

RELEVANT LEGAL PRINCIPLES IN INTERLOCUTORY INJUNCTION APPLICATION

44.  There is no dispute about the well-established principles governing the grant of interlocutory injunctions set out in American Cyanamid Co v Ethicon[6].

45.  In considering the balance of convenience, where all factors are balanced, the status quo should be preserved.  The status quo to be preserved is the position prevailing when the defendant embarked upon the activity sought to be restrained.[7]

46.  In the case of interlocutory mandatory injunctions, the principles governing the grant were summarized by DHCJ Lisa Wong, SC (as she then was) in Wu Wei v Liu Yi Ping:[8]

(i)     The difference between the grant of a mandatory interlocutory injunction and a negative interlocutory injunction is not one of principle.

(ii)    The ultimate question is: what is the course to adopt which involves the least injustice in case the grant or refusal of interlocutory relief, as the case may be, turns out to be wrong.

(iii)   The balance of convenience test is in reality a balance of the risk of doing an injustice.

(iv)   The more “assured” the court is on the merits of the applicant's case, the less will be the risk of injustice.

(v)    However, if the circumstances are that justice requires the grant of the mandatory injunction at an interlocutory stage, then such an injunction should be granted irrespective of whether the court has a “high degree of assurance” as to the merits of the applicant's case.

(vi)   Nor does the court lose sight of the practical realities of the situation to which the injunction will apply.

(vii)  Much depends on what mandatory injunction is sought.  Where the injunction sought is not expensive to comply with, or is not irreversible or would not effectively pre-empt the trial, the court may well grant the injunction without requiring a high degree of assurance even if the injunction is mandatory in effect.

47.  Where the court is satisfied that the defendant has no arguable defence to the plaintiff’s claim, it is unnecessary for the court to consider the adequacy of damages or balance of convenience before exercising its discretion to grant an injunction.[9]

SERIOUS ISSUES TO BE TRIED

48.  I agree with Mr Yan that the Plaintiffs have a strong case on the merits of the claims.

49.  The Defendants’ defences to the Plaintiffs’ claims are essentially premised on their allegation that it is the 5^th Defendant, instead of the 1^st Plaintiff, which owns the relevant intellectual property rights in and in relation to the Little Rascals.  Thus, it is contended that:

(i)     In respect of the copyright infringement claim, the Plaintiffs have adduced no evidence to show how the 1^st Plaintiff came to have acquired the copyright relating to the Little Rascals.  Further, the Plaintiffs’ reliance on estoppel is misconceived.

(ii)    In respect of the passing off claim, the 5^th Defendant is the senior user of the mark “小流氓” and has never assigned or transferred away the goodwill, and the general public always perceives the 5^th Defendant as the owner of the mark “小流氓”.  The 5^th Defendant contends that, throughout the years, he had repeatedly asserted his rights as the owner of the intellectual property rights relating to the Little Rascals.

(iii)   In respect of the trade mark infringement claim, the 1^st Plaintiff did not have any right to claim proprietorship over the mark “小流氓” and the application to register the 1^st Plaintiff’s Registered Mark was accordingly made in bad faith.  Alternatively, the 5^th Defendant is the senior user of the mark “小流氓” and the 1^st Plaintiff’s Registered Mark is liable to be invalidated.  Further, it is contended that the 5^th Defendant had been using the mark “小流氓” long before the 1^st Plaintiff first used the same and long before the 1^st Plaintiff applied to register the same in 1999.

50.  None of these contentions has any merit.

(i)  The 1^st Plaintiff is the owner of the intellectual property rights in the Little Rascals

51.  The Defendants are seeking to exploit the handicap of the present owners of the Plaintiffs, who only acquired the Plaintiffs in late 1998 long after the 1^st Plaintiff (then under the 5^th Defendant’s control) took over the comic book publishing business of the 5^th Defendant, in not having access to the full historical records and documents dating from long before they took over to contend that the Plaintiffs have not been able to produce the actual documents by or pursuant to which the intellectual property rights in Little Rascals were assigned or transferred to the 1^st Plaintiff.  However, I agree with Mr Yan that there is much other evidence which does go towards proving that the intellectual property rights in Little Rascals had indeed been assigned or transferred to the 1^st Plaintiff:

(i)     In page 7 of the prospectus issued in 1986 when the shares of 1^st Plaintiff were listed, it was stated that the 1^st Plaintiff took over the comic book publishing business previously carried on by the 5^th Defendant in 1983 and since then had been responsible for most of the Jademan Group’s publishing operations.   Significantly, in the same page of the prospectus, it was also stated that in 1984, “the Group also began to license most of its publications in Singapore and Malaysia” and that in June 1986 “a licensing agreement was also signed in respect of Thailand for the publication in the Thai language of a number of the Group’s most popular comics and publication is expected to commence in September 1986”.  Obviously, the 1^st Plaintiff could not have granted such licences if the rights therein had not been transferred or assigned to it.

(ii)    There were express acknowledgments in the 2005 Film Licence Agreement, the 2010 Covers Collection Licence Agreement and the GOD Licence Agreement that the 1^st Plaintiff is the owner of the intellectual property rights in the Little Rascals and the Dragon and Tiger Heroes comics.

(iii)   The Defendants have not produced any evidence to show that they have asserted intellectual property rights of the Little Rascals in the past 20 years.

(iv)   The other course of dealings between the parties as mentioned in §§18-31 above clearly show that the 1^st Plaintiff is the owner of the intellectual property rights in the Little Rascals.

52.  The 5^th Defendant has attempted to explain away the acknowledgment in the 2005 Film Licence Agreement by arguing that the parties were contemplating only the rights relating to the Dragon and Tiger Heroes in the agreement but not the Little Rascals by pointing out the Dragon and Tiger Heroes was first published in about 1975.   However, it is the clear language of Clause 1 of the 2005 Film Licence Agreement that the 5^th Defendant’s representation, warranty and confirmation were in respect of “the Works” of which he was “the original creator and writer” and “which were first published in Hong Kong in around 1970”. Given that it is common knowledge, and indeed the 5^th Defendant has publicly confirmed[10], that Little Rascals was first published in 1970, it is clear that the reference in Clause 1 to the Works “which were first published in Hong Kong in around 1970” must have been a reference to both Little Rascals and Dragon and Tiger Heroes.

53.  For the acknowledgment in the GOD Licence Agreement, the Defendants try to say that the 5^th Defendant’s brother, Mr CK Wong (“CK Wong”), had signed the same without paying attention to the terms thereof.  However, the evidence clearly shows that it was in fact the 1^st Defendant which had prepared and drafted the GOD Licence Agreement and had submitted the same for the 1^st Plaintiff’s approval.[11] Further, it was the 1^st Defendant which had included the acknowledgment terms in the very first draft of the GOD Licence Agreement prepared by it (see: Recitals A, B and C and Clauses 4 and 9.1 of the GOD Licence Agreement and Recitals A and B and Clause 1 of the cooperation agreement dated 11 July 2008 made between the 1^st Plaintiff and the 1^st Defendant (“the Cooperation Agreement”))[12].

54.  In addition, when the 1^st Defendant submitted the draft GOD Licence Agreement to the 1^st Plaintiff, the former had also submitted draft designs of “crossover tags” which were to be printed directly onto the products to be produced, marketed and sold by GOD pursuant to the GOD Licence Agreement or attached thereto by tags.  The designs of the said crossover tags, which included a copyright notice stating that the copyright belongs to the 1^st Plaintiff, were ultimately approved by the 1^st Plaintiff and adopted in the GOD Licence Agreement as an annexure thereto.

55.  Further, CK Wong was at the material time a director of the 1^st Defendant and clearly a person of full age and understanding.  Accordingly, the 1^st and 5^th Defendants cannot escape the consequences of the 1^st Defendant having drafted and entered into the GOD Licence Agreement, with the express statement that the 1^st Plaintiff is the owner of the copyright subsisting in the Little Rascals and Dragon and Tiger Heroes comics, by claiming that CK Wong had purportedly not paid attention to the terms thereof when signing it.

56.  The Defendants also claim that, under the GOD Licence Agreement, GOD was to pay copyright licence fees to both the 1^st Plaintiff and the 1^st Defendant.  That is not correct, as it is clear from the terms of the GOD Licence Agreement and the Cooperation Agreement that GOD was seeking a licence solely from the 1^st Plaintiff, whilst the 1^st Defendant was to act as the 1^st Plaintiff’s agent and received licence fees for and on behalf of the 1^st Plaintiff.

57.  Ultimately, pursuant to the GOD Licence Agreement, GOD produced various products including T-shirts, notebooks, stickers, wallets, postcards, keychains, coffee mugs, bags, shorts and hats. The products produced bore the names or marks “小流氓”, “龍虎門” and representations of some of the characters from the Little Rascals comics, including the three main characters (龍虎三皇).  They also featured the crossover tags which stated that the copyright belongs to the 1^st Plaintiff.

(ii)  Estoppel from denying the 1^st Plaintiff’s ownership or asserting the 5^th Defendant’s ownership of the intellectual property rights in the Little Rascals

58.  I also agree with the Plaintiffs that, based on the dealings between the parties, including the inclusion of the various copyright notices in the merchandises and publications and the acknowledgments and terms in various licencing agreements as mentioned above, the 1^st and 5^th Defendants are estopped, based on the doctrines of estoppel by convention and estoppel by representation, from denying the 1^st Plaintiff’s ownership or asserting the 5^th Defendant’s ownership of the intellectual property rights in the Little Rascals.

59.  In opposing the Plaintiffs’ claims, the Defendants submit that the principle of estoppel by convention is not applicable for the following reasons:

(i)     The Plaintiffs seek to generate new legal rights by reason of estoppel by convention, but such specie of estoppel cannot be deployed offensively to establish a cause of action.

(ii)    The application of estoppel by convention is limited to providing the basis on which the parties enter into a particular transaction, and the estoppel founded thereon will extend no further than to disputes arising out of that transaction.

60.  The Defendants further contend that the principle of estoppel by representation is not applicable for the following reasons:

(i)     Like estoppel by convention, representation-based proprietary estoppel is preclusive only and cannot constitute a cause of action for the Plaintiffs.

(ii)    The relief sought should be minimally necessary to avoid detriment.

(iii)   Further, the Plaintiff has totally failed to articulate with any precision: (a) the identity of the maker of each representation relied upon; (b) whether and how the representation affected any or all of the Plaintiffs; (iii) to whom the representation was made; and (iv) how the representation was relied upon by the Plaintiffs.

61.  Despite the able submissions of Mr Ling, counsel for the Defendants, I do not find that these arguments have any merit.

62.  On the question as to whether the Plaintiffs are relying on the principle of estoppel as a “sword” or a “shield”, the learned author of The Law of Estoppel[13] has observed that the “sword or shield” question is an unfortunate one:

“2.13 A question which sometimes arises is whether an estoppel can be used as a cause of action or claim or in support of a cause of action or claim or is confined to use in resisting a cause of action or claim. The question is sometimes clothed in a military metaphor and is phrased as whether an estoppel can be used as a sword or only as a shield.

2.14 The question is in some ways an unfortunate one since it fails to appreciate the general nature of an estoppel. That nature is that in appropriate circumstances an estoppel operates to prevent a person who has made a statement or a promise or an assurance, in reliance on which the person to whom the statement or promise or assurance is made has acted to his detriment, from going back on what has been stated or promised or assured in subsequent legal proceedings. Obviously, the person who has made the statement may be the person who in the proceedings is asserting some cause of action or claim and in that case the fact that that person may be bound to the truth or the effect of what he has stated, even though he wishes to assert the contrary, may impede his success in proving his cause of action. The estoppel can then be described as being used as a defensive mechanism or as a shield by a person resisting the cause of action. Equally obviously, the person who has made the statement and is prevented from going back on it because of an estoppel may be the person against whom a cause of action is being asserted. The estoppel can then be described as being used as an offensive mechanism or, to revert to the military phraseology, as being used as a sword. It does not seem necessary as a matter of principle to differentiate between the two possible methods or circumstances of the use of the estoppel. The underlying moral and legal basis of an estoppel, the prevent of a person from resiling from what he has stated when the person to whom the statement has been made has acted to his detriment in reliance on it, is the same in both cases.

2.15 Nor in the ordinary operation of an estoppel is any significance to be attached to whether the estoppel is relied on by the claimant or the defendant in the legal proceedings in which the estoppel is relevant.  The estoppel may be asserted with equal facility by either of the two main parties to legal proceedings or by any other party to the proceedings.  It would be irrational if the availability of an estoppel depended on which party initiated the proceedings, and so became the claimant in those proceedings, and which party to a dispute initiates proceedings may be largely a matter of chance or convenience.  For example, if a landlord under a lease sought to recover rent from the tenant, the tenant might contend that the landlord had promised that for a period only a half of the rent would be payable and that as he as the tenant had acted in reliance on this promise, a promissory estoppel had arisen which prevented the landlord from recovering the full rent for the period in question.  The issue of whether there was a promissory estoppel could in these factual circumstances arise in proceedings brought by the landlord as the claimant in a claim to recover the full rent. Equally, the same question could arise in proceedings brought by the tenant for a declaration that only a half of the contractually reserved rent was payable, proceedings in which the tenant would be the claimant.  It would be nonsensical that the tenant could rely on the alleged estoppel in the first set of proceedings but not in the second set.”

63.  The learned author went on to say the following:[14]

“The above examination of the sword or shield issue has concentrated on the use of an estoppel in support of a cause of action or in resistance to a cause of action. The reasoning has always assumed that apart from the estoppel there is an alleged cause of action and that the estoppel is or may be of assistance in establishing or denying some essential element of that cause of action. What has not been referred to is the possibility that an estoppel may of and by itself constitute a cause of action. A cause of action means those essential matters of fact which must be established by a person if that person is to obtain some remedy or relief from a court in accordance with a general principle of law. When these elements have come into existence, the cause of action is said to have accrued. For example, a person who alleges that he has a cause of action entitling him to substantial damages for breach of contract must establish the existence of a contract, the correct meaning of the contract or a term of it, the action (or inaction) which is a breach of an obligation owed to him under the contract, and the amount of loss which he suffers by reason of the breach. The general principle of law which gives a cause of action in these circumstances is that courts will enforce an obligation within a properly formed contract and will award damages equal to the loss suffered by a breach of such an obligation. A form of estoppel may assist a party in establishing by evidence one or more of these essential elements but the cause of action is for damages for breach of contract, or of course in other cases some other appropriate cause of action, and is not for an estoppel.”

64.  I agree with Mr Yan that the Defendants have failed to appreciate the difference between the use of an estoppel by itself to constitute a cause of action and the use of an estoppel to assist in establishing a cause of action.  In the present case, the Plaintiffs are not relying on the estoppel to establish a cause of action.  The relevant causes of action upon which the Plaintiffs rely are copyright infringement, passing off and trade mark infringement, and the Plaintiffs are not utilising the estoppel to establish the existence of the relevant rights or the other elements of the causes of action.  The Plaintiffs are only relying on the estoppel to preclude the 1^st and 5^th Defendants from contending that the 5^th Defendant, rather than the 1^st Plaintiff, is the owner of such rights.  In the circumstances, a difference is to be drawn between, say, the Plaintiffs claiming for damages as a result of the 1^st and 5^th Defendants resiling from their position that the 1^st Plaintiff is the owner of the intellectual property rights subsisting in the Little Rascals (such that the estoppel in itself is the cause of action), as opposed from the present case, where the Plaintiffs are claiming copyright infringement, passing off and trade mark infringement, and the deployment of the estoppel is necessary to assist in establishing these causes of action by debarring the 1^st and 5^th Defendants from resiling from their position that the 1^st Plaintiff is the owner of the relevant intellectual property rights.

65.  The Defendants also contend that the application of estoppel by convention is limited to providing the basis on which the parties enter into a particular transaction and the estoppel founded thereon will extend no further than to disputes arising out of that transaction.  The Defendants submit that “each” of the “shared assumptions” relied on by the Plaintiffs arose out of particular transactions or contractual licences and thus could only apply in respect of those particular transactions.  I reject these arguments for the following reasons.

66.  First, as a matter of law, estoppel by convention is not limited to providing the basis on which the parties enter into a particular transaction.[15]  Further, the most recent and now leading judgment of the Supreme Court of the United Kingdom in Tinkler v HMRC[16] makes it clear that estoppel by convention applies both to contractual and non-contractual dealings.  Accordingly,estoppel by convention is not limited to the particular “transaction” from which it arises, but would operate where it would be unjust to allow a party to go back on a shared assumption.[17]

67.  Second, in so far as estoppel by convention is concerned, the Plaintiffs’ case is that the shared assumption arising from the entire course of conduct during the 20 years from 2000 to 2020 gives rise to an estoppel by convention and that the entire course of conduct is evidenced by numerous representations and acknowledgments by the 5^th Defendant and his companies (including the 1^st Defendant).   The estoppel therefore refers to the mutual relations and dealings between the parties, and not that the Plaintiffs are seeking extend the estoppel to other disputes or transactions.

68.  In my judgment, the evidence clearly demonstrates that there was a common assumption between the 1^st Plaintiff and the 5^th Defendant and the companies related or controlled by him (including the 1^st Defendant) that the 1^st Plaintiff was the owner of the intellectual property rights in and relating to the Little Rascals.   The 1^st and the 5^th Defendants must have assumed some element of responsibility for such common assumption, in the sense of conveying to the Plaintiffs an understanding that they expected the Plaintiffs to rely upon it.  The Plaintiffs have indeed relied on the such common assumption in the subsequent mutual dealings between the parties: (i) the Plaintiffs had continued their business relationship with the 5^th Defendants and his companies which commenced in 2000 with the THL Agreement until such business relationship was terminated in May 2020; (ii) the Plaintiffs had granted and continued to grant to the 5^th Defendant and his companies various licences under which they were allowed to exploit the intellectual property rights in the Little Rascals and Dragon and Tiger Heroes owned by the 1^st Plaintiff;  and (iii) the Plaintiffs had entered into licensing agreements involving the 1^st and 5^th Defendants, under which the 1^st Plaintiff had granted licences to third parties to exploit the intellectual property rights in the Little Rascals and Dragon and Tiger Heroes owned by it.  Acting on such common assumption, there must have been detriment suffered by the Plaintiffs or benefit conferred upon the Defendants, sufficient to make it unjust or unconscionable for the latter to assert a position contrary to such common assumption.  Under these circumstances, all the requirements for the application of the principle of estoppel by convention are satisfied.[18]

69.  Regarding the allegation that the Plaintiff has failed to articulate with any precision the estoppel by representation, it is clear from the evidence that the 1^st and 5^th Defendants had made representations of fact (that the 1^st Plaintiff is the owner of the intellectual property rights in the Little Rascals) which are contrary to what they now contend (that the 5^th Defendant is the owner of such intellectual property rights).  These representations were clearly made with the intention of being relied upon by the Plaintiffs and have in fact been relied upon by the Plaintiffs and have induced the Plaintiffs to alter their position on the faith thereof to their detriment.[19]  Hence, the Defendants’ contention relating to estoppel by representation has no merit at all.

70.  For these reasons, the 1^st and 5^th Defendants (and indeed all the Defendants) are estopped from denying that the 1^st Plaintiff is the owner of the intellectual property rights in the Little Rascals.

(iii)  Conclusion on the merits of the Plaintiffs’ claims

71.  Though the court should not conduct a mini-trial at this stage, there is overwhelming evidence to show that the 1^st Plaintiff is the owner of the intellectual property rights in the Little Rascals.  Based on the course of dealings between the parties throughout the years, I agree with Mr Yan that the Defendants do not have a meritorious defence to the Plaintiffs’ claims for copyright infringement, passing off and trade mark infringement.  By the time that the Defendants started to embark on the conduct complained of, there had been a period of some 20 years during which not only had the 5^th Defendants not asserted his rights as the owner of the intellectual property rights relating to the Little Rascals, he and his companies had done the very opposite.  Further, the public had also been educated that it is instead the 1^st Plaintiff which is the owner of such rights.

72.  Likewise, there is no merit in the Defendants’ complaint that the application to register the 1^st Plaintiff’s Registered Mark was made in bad faith.  There is also no merit in the Defendants’ defence, based on s 19(4) of the Trade Marks Ordinance (Cap. 559), that they had been using the mark before the 1^st Plaintiff’s first use of the mark “小流氓” and before the 1^st Plaintiff applied to register the 1^st Plaintiff’s Registered Mark in 1999.  Based on the evidence mentioned above, it is clear that they have not been continuously using the “小流氓” mark from a date preceding the date of first use or registration of the 1^st Plaintiff’s Registered Mark.[20]  In particular, they had not been continuously using the “小流氓” mark during the aforesaid 20 years’ period and had only done so under licence from the 1^st Plaintiff on the limited occasions mentioned above.

73.  In light of the foregoing, I find that the Defendants do not have an arguable defence to the Plaintiffs’ claims.  This factor alone justifies the court to grant the interlocutory relief as sought by the Plaintiffs (see: §47 above).  But even if adequacy of damages and balance of convenience were to be considered by this court, these factors also favour the granting of injunctive relief at this stage.

IRREPARABLE DAMAGE

74.  On the question of adequacy of damages, the Defendants submit that: (i) there is no evidence that there are any potential licensees in relation to the licensing of the rights in the Little Rascals; and (ii) any loss allegedly suffered by the Plaintiffs can be quantified by reference to past licensing income of the 1^st Plaintiff in relation to the Little Rascals.

75.  I cannot accept these submissions.  The evidence in this case clearly shows that, if the Defendants are not immediately restrained from continuing the wrongful and infringing acts complained of, the Plaintiffs will undoubtedly suffer very serious and irreparable damage:

(i)     One of the most important aspects of the businesses of the Culturecom Group and the Plaintiffs is the licensing of intellectual property rights in and in relation to comics series, in particular the Dragon and Tiger Heroes Series.  If the Defendants are not immediately restrained from continuing their alleged wrongful acts, this crucial aspect of the Plaintiffs’ business will be wholly undermined as licensees and potential licensees will lose faith and belief in the Plaintiffs and will be caused to wonder if the Plaintiffs do indeed own and hold the intellectual property rights which they claim to own and to be in a position to licence.  This is particularly the case because the 1^st Defendant and the 5^th Defendant’s companies, for close to 20 years, have been, and have been widely known to have been, licensees of the intellectual property rights in and in relation to the Dragon and Tiger Heroes Series, including the Little Rascals series.  Such damage to the Plaintiffs’ business and credibility would be impossible to quantify.  Indeed, the Plaintiffs’ licensing business has already suffered as a result of the Defendants’ wrongful acts as one of the 2^nd Plaintiff’s licensees, 創造館有限公司, has terminated its licence agreement for the publication of 《小流氓》復刻版漫畫 with the 2^nd Plaintiff.

(ii)    Harm and damage have already been caused to the Plaintiffs’ reputation.  Since the commencement of the present proceedings, there have been discussion on online forums, on which some members of the public have criticised the Plaintiffs for “bullying” the 5^th Defendant.  The extent and severity of such damage of the Plaintiffs’ reputation and credibility is simply impossible to ascertain or quantify.

(iii)   The alleged wrongful activities of the Defendants will also lead to the dilution of the uniqueness and distinctiveness of the 小流氓 name and mark. This damage is again unquantifiable.

(iv)   The Plaintiffs are also most concerned that if others see that the 1^st Defendant, which has been, and which has been known to have been, a licensee of the intellectual property rights in and in relation to the Dragon and Tiger Heroes Series, including the Little Rascals series, can blatantly, and with impunity, continue to make use of and exploit such intellectual property rights when its licence from the Plaintiffs has been terminated, they may also be tempted to follow suit.

(v)    Even if the loss and damage caused by the Defendants’ wrongful acts is quantifiable, there is no indication that the Defendants would be in a position to pay monetary compensation.  The current situation has arisen due to the 1^st Defendant’s financial difficulties and inability to pay royalties owed to the 2^nd Plaintiff.  The Defendants’ allegation that the 1^st, 2^nd and 3^rd Defendants are “clearly well-established companies with established ongoing businesses” is a bare assertion.  The only evidence which the Defendants have managed to adduce are audited reports and financial statements of the 1^st Defendant dating from 2017.  Despite being clearly aware that it is the current state of the Defendants’ finances which are relevant, the 1^st and 5^th Defendants have not provided updated evidence about their current financial positions.  There is simply no evidence showing that the Defendants would now be in a position to pay any monetary compensation.

76.  On the other hand, the Defendants have not demonstrated that they will suffer any irreparable damage:

(i)     For some 20 years until 2020, not only had the 1^st and 5^th Defendants, both expressly and by their conduct, acknowledged and confirmed that the 1^st Plaintiff is the owner of the intellectual property rights in and in relation to the Little Rascals, there have been widespread and repeated marketing, sale and distribution (including by the Defendants) of numerous publications and products which bear clear acknowledgements of the 1^st Plaintiff’s rights in the Little Rascals.  The granting of the injunction will simply have the effect of restoring the parties to the position in the 20 years prior to the Defendants’ recent efforts to resile therefrom.

(ii)    The Defendants’ allegation that they have plans to market a commemorative version of Little Rascals is a bare assertion without supporting evidence.  In any event, the 50^th year anniversary of Little Rascals was in 2020 which has already passed, and any loss suffered should and can be easily quantifiable and compensated for in monetary damages.

(iii)    The proposed sale at the art gallery in Hong Kong which was scheduled to take place in January 2021 has already passed.  As regards the comic art work exhibition, the 5^th Defendant is the author of numerous comics other than Little Rascals.  There is no reason why the 5^th Defendant’s participation in the said event should have been deferred simply because he cannot use the Little Rascals.  Indeed, it has recently come to the Plaintiffs’ attention that the comic art work exhibition has already taken place.

(iv)   As regards the Defendants’ assertion of negative publicity and concerns from the Defendants’ business partners, the Defendants have not adduced any evidence nor even given any particulars of the alleged enquiries despite the undertakings given by the Defendants in November and December 2020 having already been in place for over 8 months.  Further, if there has been any negative publicity created, it has been entirely the Defendants’ own fault as: (a) they well knew that they had themselves acknowledged the Plaintiffs’ rights for the past 20 years; (b) they had been warned against infringing the Plaintiffs’ rights once they announced that they intended to give away free copies of Issue Nos 1 and 2 of Little Rascals; and (c) the 5^th Defendant had himself asked for permission to give away the free copies and had been told that the Plaintiffs would be prepared to grant a licence for this at a nominal fee but never took up the offer[21].

(v)    The Defendants’ contentions that the intellectual property rights in relation to the Little Rascals is “one of the most important assets” of the 1^st and 5^th Defendants and that whether or not the 1^st and 5^th Defendants are allowed to freely use the intellectual property rights of the Little Rascals is vital to their business and the preservation of goodwill attached to such a classic group of works have little merit.  It is inconceivable how an interlocutory injunction would cause “substantial and irreparable loss and/or damage” to the 1^st and 5^th Defendants’ business when for 20 years prior to 2020, neither of them had ever asserted the 5^th Defendant’s alleged ownership of or “freely use[d] the IP Rights of the Little Rascals” but had done the very opposite.

(vi)   The 5^th Defendant’s concerns relating to the Plaintiffs’ financial position is misconceived.  The mere fact that Culturecom Holdings Limited has suffered losses does not mean that the Plaintiffs would not have the financial means to honour their cross-undertaking in damages.  The Plaintiffs have adduced evidence showing that they are in a position to pay damages to the Defendants.

77.  In light of the foregoing, I accept Mr Yan’s submission that damages would clearly not be adequate to compensate the Plaintiffs for the damage which will be caused if the Defendants are allowed to resume their alleged wrongful acts, whilst the Defendants would be adequately protected by the Plaintiffs’ cross-undertaking in damages if it transpires that the interlocutory injunctive relief now sought is wrongly granted.  Under such circumstances, the court should grant the injunctive relief sought without even having to consider the balance of convenience.

BALANCE OF CONVENIENCE

78.  In any event, the balance of convenience also favours the granting of the injunctive relief.

79.  In considering the balance of convenience or the balance of justice, the court is entitled to take into account the following factors:

(i)     Whether the plaintiff has demonstrated a strong case on the merits;[22]

(ii)    If the defendant has embarked on the wrongful activities with his eyes wide open or through a lack of prudence, this is a factor which weighs heavily against the defendant;[23] and

(iii)   In considering the balance of convenience, the court should consider if the defendant has yet to start or has just newly embarked upon the infringing activities complained of.[24]

80.  In my judgment, the strength of the Plaintiffs’ case alone justifies the granting of the injunctive relief at this stage.   If the other factors need to be considered, the balance would also be in favour of the Plaintiffs:

(i)     The Defendants have obviously embarked on their present course of activities cynically and with their eyes wide open and were fully aware of the risks involved.  The Defendants can hardly complain if their risky and illegal venture backfires.

(ii)    The Defendants had, for 20 years until 2020, never asserted the 5^th Defendant’s alleged rights in the Little Rascals but had done the very opposite.  They only recently began to release the alleged infringing publications in 2020 before ceasing to do so upon the Plaintiffs instituting the present proceedings and securing the undertakings from the Defendants in November and December 2020, whereas the Plaintiffs have been exploiting the intellectual property rights in and in relation to the Little Rascals and Dragon and Tiger Heroes Series since 1983.  Under such circumstances, it would be appropriate for the court to preserve the status quo which had existed for 20 years before the Defendants suddenly decided to embark on their alleged wrongful activities.

81.  For the reasons given above, I allowed the Plaintiffs’ application for injunctive relief subject to some minor amendments in the terms.