XCHRX POLOTOYS INDUSTRIAL LTD. v. FAIRING INDUSTRIAL LTD. AND ANOTHER

HCA 18746/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO. 18746 OF 1998

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J U D G M E N T

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1. This is an application for summary judgment by the Plaintiff against both Defendants. The Plaintiff carries on the business of manufacturing and selling toys and other plastic products. It alleges that each of the Defendants have infringed its copyright in artistic works comprising technical drawings, prototypes and moulds used for the production of plastic toy tea sets made up of tea cups, saucers, sugar bowls, milk jugs, plates, tea-pots, knives, forks and spoons.

2. Mr Norman Hui, who appears for the Plaintiff, outlined the requirements which he has to fulfill if he is to succeed. He submitted, and I accept, (this being a case now solely involving secondary infringement) that he faces four hurdles. In particular, the court must be satisfied that :-

(1) the copyright subsists and is owned by the Plaintiff;

(2) the subject-matter of the complaint infringes that copyright;

(3) the Defendant has committed acts of infringement; and,

(4) the Defendant had the requisite actual or constructive knowledge to found a secondary infringement.

3. As this is an application for summary judgment, the court must be satisfied that there is no triable issue in relation to the abovementioned matters.

4. Having listened with care to Mr Hui's helpful submissions, I have come firmly to the conclusion that this is not a case in which the Plaintiff is able to discharge such a heavy burden and that the Defendants must be given unconditional leave to defend. In the light of that conclusion, it is undesirable for me to go into any detail and I should merely explain in outline what I consider to have been the main stumbling blocks preventing the Plaintiff from obtaining summary judgment in the present case.

5. In this Action, the Plaintiff complains of four separate instances of infringement which involve two separate types of allegedly infringing tea set.

6. The first instance of alleged infringement involves both Defendants and a company called Wellco Exports Limited. According to the Plaintiff, on about 27 May 1998, Wellco, at the Plaintiff's request, obtained from the 2nd Defendant two sample toy tea sets ("the samples"). These are said to be infringing copies which were supplied together with a list quoting prices and terms of sale which was evidently issued by the 1st Defendant. The samples constitute the first of the two separate forms or manifestations of alleged infringement and the Plaintiff says that the 1st Defendant committed acts of secondary infringement by offering or exposing for sale, possessing for trade purposes and/or exhibiting in public, or distributing the samples. The 2nd Defendant is alleged to have participated jointly with the 1st Defendant in these acts, the Plaintiff arguing that the two companies (who allegedly share the same telephone and fax numbers) are closely related and operate virtually as one.

7. The 2nd Defendant disputes this, contending that its business is wholly separate from that of the 1st Defendant and that it had nothing to do with providing the samples or the quotation to Wellco. This is supported by the 1st Defendant which alleges that while it has been allowed to share office space at the 2nd Defendant's premises due to friendship between some of the two companies' respective directors, it is merely a small trading company and operates entirely separately from the 2nd Defendant which engages in manufacturing as well as sales. The 1st Defendant also supports the 2nd Defendant's averment that the latter did not supply the samples as it effectively accepts that it was itself, the 1st Defendant, who did so. In such circumstances, it is my view that, in relation to the samples obtained by Wellco, the 2nd Defendant has raised a triable issue.

8. The 1st Defendant's position in relation to the price list and the samples is as follows. It says that it was approached by a certain Mr Wong of Fu Yee Bo Company in Guangzhou in about July 1997 and given about 20 toy tea sets and asked to try to market them in Hong Kong. It is alleged that the samples sent to Wellco were part of these sets and that the 1st Defendant did not know that anyone's copyright was being infringed.

9. In relation to the 1st Defendant, I will say nothing about any difficulties that the Plaintiff might or might not face in relation to subsistence and ownership, infringement and acts of secondary infringement. However, it is my view that a triable issue exists as to whether the requisite knowledge can be established as against that Defendant. Mr Hui pointed to certain matters from which he invited the court to infer such knowledge. However, I was not persuaded that such inferences could be drawn and certainly not drawn to the degree of certainty required in an Order 14 application.

10. The remaining three instances of alleged infringement involve only the 2nd Defendant. Two of these instances involve photographs of a toy tea set or tea sets which appeared in a trade directory called "Hong Kong Toys" and in a catalogue issued by the 2nd Defendant. The toys pictured certainly appear, so far as one can tell, to be very similar to the items included in the samples and Mr Hui invited the court to find that they were in fact photographs of such samples used by the 2nd Defendant. It is alleged that by circulating the photographs in the said publications, the 2nd Defendant was exhibiting infringing copies for sale.

11. The 2nd Defendant on the other hand explains that it acquired the items shown in the photographs from a hawker trading near the Lo Wu train station just across the border. It alleges that it did not engage in manufacturing any of these items but included them in the trade publications as a means of testing the market for customer interest in toys of that general description. It also contends that it lacked the requisite knowledge to constitute secondary infringement.

12. This raises a factual dispute. In my view, while aspects of this explanation (and certainly some of the 2nd Defendant's admitted business practices) might quite justifiably be regarded as questionable, I do not think this a case where the explanation is so incredible that summary judgment should be awarded notwithstanding the factual dispute.

13. The last instance of alleged infringement involves the admitted importation into Hong Kong and sale by the 2nd Defendant of 2,088 tea sets to a buyer named Partney International Limited ("the Partney tea sets"). The 2nd Defendant has filed evidence to show that some at least of these items were designed and manufactured by a particular mainland factory. They contend that they do not constitute infringing copies.

14. Having compared the items comprising the Partney tea sets with the items comprising those of the Plaintiff, I have come to the conclusion that it is at least arguable that they lack sufficient similarity to constitute evidence of copying and that the matter should be fully investigated at trial. I will say no more as to the other elements of infringement.

15. I therefore order that the Defendants have unconditional leave to defend and, subject to hearing further argument as to costs, would make an order for costs to be in the cause.