R.J. REYNOLDS TOBACCO COMPANY AND ANOTHER v. LEONG IO-KEI AND ANOTHER/title>

Headnote

                Passing-off : reputation in foreign country : supply of articles, amounting to instruments of deception, for use abroad: injunction granted.

1984 No. 2628

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiffs are tobacco manufacturers, makers of Winston cigarettes, a well-known brand. This cigarette packet has a distinctive get-up, including bright red colouring at the top and bottom, bisected with a gold stripe. The centre of the packet is white and contains the name Winston. The packet also bears the symbol of a crown surrounded by dots.

2. Winston cigarettes have been sold world-wide in this packet since 1954. More recently the plaintiffs have taken advantage of their reputation in the name Winston by selling other items, mostly clothing, bearing the name and the red, white and gold get-up. In particular, jeans and other garments have been manufactured in Hong Kong by the plaintiffs' licensees and sold in the Middle East. Apart from one occasion, Winston garments have not been sold on the local market. In 1979 the plaintiffs and Bang Bang Fashions Limited launched a joint promotion campaign in Hong Kong, in which the latter undertook to produce at least 10,000pairs of jeans bearing the Winston get-up.

3. In September, 1983, the defendants imported 7,860 pairs of jeans from Macau, where they had been manufactured. They were to be shipped from Hong Kong to Egypt for sale in that country, but were seized by customs officers, presumably because they bore the Winston trademark. They are now stored in a godown in Hong Kong.

4. The plaintiffs seek an injunction to restrain the defendants from dealing with these jeans, and other garments bearing their trademark. Applications to register the latter in Hong Kong and Macau have been made, but are still pending.

5. Mr. Rogers, for the plaintiffs, submits that two torts are involved. The first is the supply of articles, amounting to instruments of deception, for use abroad. Such an act would enable the defendants to pas off abroad, as Winston jeans, garments totally unconnected with the plaintiffs. It is submitted that this tort is completed by the act of putting them on a ship in Hong Kong. The second tort is the proposed passing-off in Egypt, the country of destination.

The First Tort

6. In Orr Ewing & Co. v. Johnston & Co. 1880 13 Ch. Div. 434, the headnote of the report in the Court of Appeal reads:

"If one trader appropriates a material and substantial part of a trade-mark which belongs to another trader he is bound to use such precautions as to avoid the reasonable probability of error and deception, and the onus is on him to show that purchasers of the goods will not be deceived.

If the goods of a trader have acquired in the market a name derived from a part of the trade-mark which he affixes to them, a rival trader is not entitled to use a ticket which is likely to lead to the application of the same name to his goods, even though that name  is not the only name by which the goods of the first trader have been known, or though it has been always used in conjunction with some other words.

Where a trader has a right to a trade-mark on goods sold in a foreign market, an injunction will be granted to restrain the export of goods under another trade-mark which may deceive the ultimate purchasers, although it would not deceive Englishmen or the dealers in the foreign market.

Where a trader has innocently adopted a trade-mark which is calculated to deceive by its similarity to another person's trade-mark, his continuing to use it after complaint has been made is strong evidence of fraud.

Injunction against the use of trade-mark by Defendant was made general although the Plaintiff had never used his trade-mark except in the Indian market.

The books of the Registrar of Trade-marks which shew marks the registration of which has been refused, are not evidence that these marks are publici juris. "

7. In the House of Lords [ (1882) 7 App. Cas. 219 ], where the Court of Appeal decision was affirmed, Lord Watson said at page 231:

"......But no man, however honest his personal intentions, has a right to adopt and use so much of his rival's established trade-mark as will enable any dishonest trader, into whose hands his own goods may come, to sell them as the goods of his rival."

8. This decision was followed in John Walker & Sons Ltd. v. Henry Ost & Co. Ltd. 1970 R.P.C. 489.  On this aspect, Foster J. concluded at page 508:

"I would be slow to decide that if a trader in England sells goods and labels which are true and has no knowledge of any improper use of those goods in a foreign country, such trader has committed a tort in England. But when I have already held as a fact that Mr. Jindrich Ost, the proprietor of the first defendant, not only knew that the second defendant was going to add cane spirit and sell it as Scotch Whisky but intended that the whisky which was supplied should be admixed, bottled and have the labels put on the bottle describing it as Scotch Whisky, then in my judgment the first defendant's acts in selling those instruments amount to tortious acts done in England."

9. In the present case, of course, the labels were already attached to the jeans before they arrived in Hong Kong. I conclude that, there is no burden on the plaintiffs to prove any reputation in the goods in question in Hong Kong.

10. It is, however, vital to the plaintiffs' case that they establish such a reputation in Egypt. The court must be satisfied that the defendants' conduct is calculated to pass off other goods as those of the plaintiffs, or, at least, to produce such confusion in the minds of probable purchasers as would be likely to lead to the other goods being bought or sold as those of the plaintiffs.

11. Winston cigarettes have been sold in Egypt in the present packet since 1956.  In 1982 22,000,000 units were sold; in 1983 the figure was 46,000,000. Advertising and promotional expenses for these years were US$167,000 and US$181,000 respectively. There can be little doubt, therefore, that the Winston 'get-up' is well-known in Egypt.

12. 95,671 jeans and trousers bearing the Winston mark were sold in Egypt in 1982 and 42,602 in 1983. The respective advertising and promotional expenses for Winston garments in these years were HK$247,964 and HK$135,726. On the face of it, the plaintiffs also have a reputation for jeans in Egypt.

13. Mr. McLanachan, for the defendants, submits that any such reputation is diluted considerably by the fact that jeans with the same Winston get-up are to be found on the Egyptian market, which apparently do not emanate from either the plaintiffs or the defendants. Several such garments have been produced in evidence by the defendants, which have been obtained from their Egyptian customer, Mr. Hassan Hashem. The defendants say that these garments have no connection with either the plaintiffs or the defendants, yet it is perhaps significant that there is a rivet at the base of the side pocket that is identical to one found on the sample garment taken from the customs godown, which is not to be found on the plaintiffs' jeans. There is no evidence as to the quantities of such garments available in Egypt. The plaintiffs' agent in Egypt says fake Winston jeans are not extensively sold.

14. Mr. Mclanachan submits that this does not help the plaintiffs, since there is no evidence as to the size of the Egyptian market for jeans; the plaintiffs may have a reputation for jeans, but it may be in respect of a small slice of a large market.

15. Moreover, the plaintiffs admit that passing-off actions in Egypt were commenced, but withdrawn in the face of threatened violence, which was totally unconnected with the defendants. This could have had the effect of greatly increasing the number of bogus Winston garments on the market and thereby diminishing the plaintiffs' reputation, such as it was.

16. Having considered the matter with care, I am bound to say that I am impressed with the advertising and promotion expenditure; the plaintiffs would scarcely be throwing good money after bad. I think, on balance, that the plaintiffs have proved a sufficient reputation  in jeans in Egypt to justify protection from. passing-off. There is, in my judgment, a real risk of confusion on the part of the Egyptian customer.

17. Mr. Mclanachan also submits that there has been no 'supply' in Hong Kong; there is no sale in Hong Kong and no middleman, as there teas in Walker v. Ost. I see no merit in this point. When the defendants shipped the goods from Hong Kong to Egypt, that would have been part of the act of supplying them to Hassan. It is immaterial where the sale takes place, or even whether there is a sale at all.

18. Finally, it is submitted that there is no evidence that the defendants knew that there would, or could, be deception in Egypt. But it is well settled that fraud is not a necessary element of the. right of action, and the absence of an intention to deceive is not a defence. Baume v. Moore1958 R. P. C. 226.

19. I find that the plaintiffs have made out an arguable case of passing off, by virtue of the supply of instruments of deception in Hong Kong by the defendants. It is not necessary, therefore, to consider the second leg of Mr. Rogers' argument concerning the alleged passing-off in Egypt.

20. The next question is whether the plaintiffs can be compensated by damages. It is true that there is no particular cachet in the name Winston; we are not concerned with a product such as a Cartier watch. Nevertheless I have found that the plaintiffs have a reputation in their garments. If the defendants are not restrained on this occasion, there is a serious risk that inferior products may reach the Egyptian. market. Were this to happen, the plaintiffs' reputation will be affected. They will lose control of their standard of quality. In my view, such a loss is impossible to quantify in damages

21. The defendants are in a different position. This is their first venture into Egypt and there is no evidence that there are to be further dealings with Hassan, or any other Egyptian importers. If they succeed at the trial, damages are quantifiable on the basis of their contract with Hassan. Mr. Mclanachan submits that other importers, using the Winston get-up, may have cornered the market in the meantime. I think that such an approach is too speculative. It may or may not be so.

22. Since, in the case of the defendants, damages will be an adequate remedy - the plaintiffs are clearly capable of fulfilling their undertaking - I see no reason to refuse the injunctions sought.

23. I have been asked to limit the order to Egypt, but I do not think this would be right. If the defendants wish to export to any other country, they are at liberty to apply to the court for a variation of my order. The court would then have to consider whether a passing-off action lay in respect of that other country.

24. There will be an order in terms of the summons, as amended and initialled by me.