LARK INTERNATIONAL HOLDINGS LTD AND ANOTHER v. LARK INTERNATIONAL DEVELOPMENT LTD AND OTHERS

HCA 1289/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1289 OF 2009

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BETWEEN

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J U D G M E N T

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INTRODUCTION

1.  The Plaintiffs (Holdings and Apparel) seek summary judgment or (alternatively) an interlocutory injunction against the Defendants (Development, Ms Balkir and Mr Sumer). The Plaintiffs have irrevocably abandoned the allegations of fraud pleaded against the Defendants in the Statement of Claim.

2.  Apparel is a subsidiary of Holdings. It supplies garments and accessories to wholesalers and retailers in Hong Kong and abroad. Development markets promotional items (that is, items which Development’s clients can give away as presents with their products) in Turkey and elsewhere in Europe. Mr Sumer and Ms Balkir, both resident in Turkey, are husband and wife and control Development. Apparel and Development are Hong Kong companies.

3.  By a Sales Representation Agreement (SRA) dated 24 June 2004 Apparel appointed Ms Balkir as sales representative with the exclusive right to market promotional items bearing the Plaintiffs’ mark in Europe. The SRA was terminated in June 2005. But thereafter Apparel apparently continued to deal with Ms Balkir on a similar basis to that set out in the SRA until mid-2008. When exactly in mid-2008 the relationship ended is unclear.

4.  It is the Plaintiffs’ case that, following the termination of their business relationship with the Defendants, Development has been wrongfully passing off its goods as those of the Plaintiffs.

II. DISCUSSION

A. Summary Judgment

5.  I do not think that this is a suitable case for summary judgment. In my view, there are major issues between the parties which need to be resolved through trial. Without in any way attempting to be exhaustive, let me identify some of those issues below.

6.  To establish passing off, the Plaintiffs must satisfy the Court of the following:-

(1)  The Plaintiffs enjoy goodwill in relation to a name or mark.

(2)  The Defendants have made a misrepresentation by use of a name or mark, such that the public has been led to believe (or is likely to believe) that the Defendants’ goods, business or services are those of the Plaintiffs.

(3)  The Plaintiffs are likely to suffer damages as a result of the misrepresentation.

7.  One difficulty in granting summary judgment is that there is a dispute in relation to goodwill. There is a question, for instance, whether the Plaintiffs engaged in the marketing of promotional items prior to their relationship with the Defendants.

8.  It is Ms Balkir’s contention that she was the party who built up the goodwill now being claimed by the Plaintiffs in relation to promotional goods. Ms Balkir says that, until Apparel entered into a relationship with the Defendants, Apparel’s goodwill arose from the marketing of clothing and clothing accessories. Before the relationship, in contrast to Ms Balkir and Mr Sumer, Apparel had not been (Ms Balkir claims) actively engaged in the sale of non-clothing related products for the promotion of clients’ businesses.

9.  Apparel argues that the SRA itself recites that Apparel has been “in the business of having manufactured and selling various sundry products for giving away by Customers collectively named promotional items”. But I am unable to take such a declaration in a contract as conclusive.

10.  The Plaintiffs further assert that they have been running the business of “promotional items” since at least 1980 and have “various customers worldwide”. But I do not think that the Court can take such statement at face value without the benefit of testing through cross-examination at trial. It all depends on precisely what non-clothing related “promotional items” the Plaintiffs are referring to and how extensively such items have been marketed over the years by the Plaintiffs to customers worldwide.

11.  Another difficulty arises in establishing misrepresentation to the Court’s satisfaction.

12.  The Plaintiffs suggest that, even if the Plaintiffs only entered into the promotional products business after the SRA, “the overlap of the Plaintiffs’ and Defendants’ businesses is so great that Development’s use of the Lark Marks will lead the public to think that Development ... is associated with the Plaintiffs”. In this respect, much play is made by the Plaintiffs of the continued maintenance by the Defendants of 2 websites beyond the middle of 2008. Those websites (the Plaintiffs say) misrepresented the Defendants as being connected with the Plaintiffs despite the breakdown in relationship. In particular, in a “Contacts” section, the websites referred to the “LARK HK HEAD OFFICE” as being Development’s Hong Kong address.

13.  The Defendants say that the 2 websites were merely those in use when the parties had a business relationship. The websites are no longer in operation. The websites had (the Defendants claim) inadvertently not been taken down immediately when the relationship broke down in mid-2008. According to the Defendants, the identification of Development’s Hong Kong address as Hong Kong Head Office had been a mistake. Such mistake had already been present in the websites before mid-2008. The mistake is alleged to have been made by the person who designed the website for the Defendants. The mistake had not been noticed by the Defendants until the present litigation.

14.  In my view, I can only determine the truth or falsity of the Defendants’ allegations following cross-examination at trial. The Plaintiffs insist that for the purposes of passing-off “a misrepresentation is a misrepresentation” however inadvertent or innocent. But I am currently not convinced that the authorities cited by the Plaintiffs’ counsel Mr Gary Lam (Parker-Knoll Ltd. v. Knoll International Ltd. [1962] RPC 265 (at 290 ll. 25-35 per Lord Devlin) and Asprey and Garrard Ltd. v. WRA (Guns) Ltd. [2002] FSR 31 (at para.49 per Peter Gibson LJ)) support such a wide proposition. It seems to me arguable that, for there to be a misrepresentation, someone must intentionally (as opposed to inadvertently) make a statement which is intended to (or likely to) confuse. I am not sure that has been the case here as a matter of fact.

15.  The Plaintiffs complain that the use of the Plaintiffs’ mark in the websites constitutes an infringement. For similar reasons to those which I have just mentioned, I am not sure at this stage that the Plaintiffs are right. The websites were originally intended to promote the Plaintiffs’ business. It is possible that the websites may have been belatedly taken down due to inadvertence following the termination of the parties’ relationship. Even so, I cannot say at this stage that the mere fact of the websites’ continuance for a period necessarily means that the use of the Plaintiffs’ marks in the websites constituted an infringement of trademark by the Defendants. But for the mistake as to the Hong Kong Head Office address, the websites could conceivably be regarded as having promoted the Plaintiffs’ business in the same way that the websites were supposed to be doing before the breakdown of the parties’ relationship.

B. Interlocutory Injunction

16.  The Plaintiffs seek to enjoin the Defendants from using the “Lark” or “Lark International” name or mark pending trial. I do not think that the balance of convenience points to continuance of an interim injunction.

17.  First, if the Defendants are seeking to enjoin Development from using the name “Lark” or “Lark International,” it is far from clear at this stage that the Plaintiffs have any intellectual property rights in those words taken alone. The Plaintiffs are the registered owners of a mark comprising the word “Lark” in conjunction with a distinctive device.

18.  Second, the only instance of alleged trade mark infringement so far identified by the Plaintiffs is the maintenance of the websites. Those websites are not currently in use.

19.  Third, the Plaintiffs have opposed the use by the Defendants of the “Lark” name and mark in Turkey. Their opposition failed. The Turkish Court’s first instance decision is now under appeal by the Plaintiffs. In the interests of comity, I should be circumspect about indirectly influencing the ongoing litigation in Turkey through the grant of an injunction here.

20.  Fourth, despite knowing about the websites and their mention of Development’s address, the Plaintiffs delayed in bringing this action. They say that they had good reason in so delaying in light of the ongoing Turkish litigation. That may or may not be a good reason. But the delay casts doubt in my mind on whether the Plaintiffs would indeed suffer irreparable damage in their name and reputation if an interim injunction were refused.

21.  Fifth, assume that, if an injunction is refused, the Plaintiffs may suffer damage that could not be compensated by a money payment. The Defendants plausibly say that, being a small business, they would similarly suffer irreparable loss if before trial they had to trade under another name as a result of an injunction. For instance, it would take time to set up a change in name and to build up a reputation and goodwill in connection with that new name. Existing or potential customers would inevitably be lost to the Defendants. I should add that, despite the ongoing Turkish litigation, the Defendants currently have no interest in using the Plaintiffs’ marks (that is, the Plaintiffs’ device appearing either by itself or with the word “Lark”).

22.  Sixth, if it comes to a question of preserving the status quo, it seems to me that Mr Edward Alder is right in submitting for the Defendants that the status quo must be the situation which prevailed before the Plaintiffs applied for an interim injunction. Mr Lam fairly accepted this proposition.

23.  Seventh, if (as I intend to do) I give directions for a speedy trial, the interval between the present hearing and trial should not be long. That alone would militate against the grant of an injunction at this stage.

III. CONCLUSION

24.  For the above reasons, the Defendants will have unconditional leave to defend. The ex parte interim injunction previously granted to the Plaintiffs is discharged. For completeness, I should add that, although Mr Alder suggested that the Plaintiffs were guilty of material non-disclosure at the ex parte stage, I have not been persuaded by that suggestion.