BANG & OLUFSEN A/S v. TO HOK CHUNG

HCA2596/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2596 OF 2005

J U D G M E N T

1. This is the plaintiff’s application under Order 14 for summary judgment in a case based on infringement of registered design and infringement of copyright. 

2. The plaintiff is a well known designer and producer of audio and video equipment which, it says, is of high quality, and I think that is known to be the case.  The defendant is also in the business of production and sale of audio visual equipment.  The defendant, it appears, carries on his business through one Mirage Electronics (Shenzhen) Co. Ltd., a copy which is wholly owned by him and of which he is the chairman, or other senior officer, under the appropriate law.

3. The case is based on the apparent infringement of registered design and also copyright infringement in respect of an audio visual machine called the “BEO Center 2”, which the plaintiff describes as a high-end integrated audio and video system.  It consists of an oval-shaped player or control unit into which a DVD or VCD or CD disc may be placed.  The cover of the unit is in two parts on the upper side of the oval and they slide apart to reveal the spindle or turntable onto which the DVD is placed.  There is also a transparent plastic cover, apparently, which comes up and then sits down on top of the disc so that it may be played.

4. The registered designs for this are appended to the summons and they are also in the bundle.  they are an exhibit to the evidence of a Mr Mouritsen, who is the legal counsel of Bang & Olufsen A/S.

5. What the design drawings do not show but what is apparent from a catalogue or brochure of the BEO Center, which has been produced as an exhibit to an affirmation by the defendant’s solicitor, Mr Yeung, is that the BEO Center 2 does not consist only of the oval-shaped control unit but it also comes with a socket unit to which, apparently, it is connected by a single cable.  The connections at the socket unit are shown as being “Headphone, AV, S-Video, Video, Audio line out, Digital audio out (coax), Audio aux in/out, Master link, Power link, DAB aerial, FM aerial, AM aerial (dedicated)”.  So it would appear from this that the power goes into the command unit or player - that is, the oval-shaped device - and the output in the form of audio and video signals comes out of that unit by means of the same cable to the socket unit, and, of course, the socket unit is then plugged into the mains to provide power, and from the socket unit cables can be attached to other devices, such as televisions sets, loudspeakers, computers and so forth.

6. I mention this because it is relevant to one of the points raised by the defence later.  But it is better, before approaching this point, to describe the defendant’s device in respect of which the complaint is made.  Now this is also an oval-shaped player or command unit and it similarly has two covers, which slide apart, on the upper surface.  Like the Bang & Olufsen unit, on the upper part of this upper surface there is a black display panel.  There are some differences because the display panel on the defendant’s unit is rather different from the display panel, which is completely smooth, on the Bang & Olufsen unit; the defendant’s unit display panel has raised buttons on it and a separate window in the middle in which the LCD display appears.  But a significant difference between this and the Bang & Olufsen unit is that on the rear part of the oval - the circumference of the oval - there is an array of sockets for power in (low tension power), audio and video, audio out (optical) and a socket marked “RGB/YUV”.

7. It would appear, therefore, that this unit may be connected to the mains - and, indeed, I have seen it demonstrated in court - by a transformer unit, and it may also be connected by means of the sockets to other devices, such as loudspeakers, television sets and the like.

8. I leave the description of the unit and go to the case which is brought by the plaintiff, and that is that the plaintiff is the registered proprietor of the registered design, which is the design for the BEO Center 2, that is, design registered in Hong Kong under Certificate of Registration of Design No. 0311139.0 registered on 21 July 2003.  I do not think there is any dispute that the plaintiff is the registered proprietor of the registered design.

9. The plaintiff says that the defendant has infringed the privileges and rights under the Certificate of Design by importing into Hong Kong, offering for sale and selling in Hong Kong, products incorporating the designs which are not substantially different to the Hong Kong design.  In other words, it says that the defendant has sold its product which is not substantially different to the BEO Center 2 or the design, specifically the design drawings of the BEO Center 2.

10. I note the particulars.  It is pleaded that the defendant offered for sale, and subsequently sold to GoodBuy Company A/S 60 pieces of its DVD player on 3 December 2005.  It says the contract was completed by the shipment of these items from Hong Kong by air on 3 December 2005, and the import into Hong Kong prior to the above export of the DVD players.  The DVD players were manufactured by Mirage Electronics (Shenzhen) Co. Ltd.  And as I have indicated, this is a company which is wholly owned by the defendant.

11. That is the plaintiff’s ground of claim for infringement of the registered design.  There is also a claim for infringement of copyright in that the plaintiff is the owner of the copyright in the design drawings for the BEO Center 2, and it is said that the defendant has infringed the plaintiff’s copyright and those design drawings by importing, offering for sale and selling the product, which substantially reproduced the design drawings in a material form.

12. The defendant has filed a defence and in that defence - indeed it is an amended defence and counterclaim - it denies the allegations of infringement and it also raises the issue that the design is and always has been invalid because the Hong Kong design does not comply with section 2 of the Registered Designs Ordinance, Cap.522, and is not an article within the meaning of section 2 of the said Ordinance as it is not an article of manufacture, nor is it made or sold separately.  Issues are also raised about features on the finished article:

 “which do not appeal to or are judged by the eye or contain features of shape or configuration dependent on the appearance of another article or which the article is intended by the designer to form an integral part”.

13. I do not think that I need to go into the principles of Order 14  because these are well known but I will go to the issues which, according to the defendant, are triable issues and these are that, for the copyright claim, there is a triable issue as to whether the defendant has committed any infringing act.  Secondly, if it did, whether the defendant had the necessary knowledge at the relevant time.  Then if the answers to those questions are both in the affirmative, whether the alleged infringing product is substantially similar to the alleged copyright works.

14. For the registered design claim it is said that there are issues as to whether the registered design relied upon is validly registered and if it is whether there was any infringing act.  And if the answers to both questions are in the affirmative, whether the alleged infringing product is not substantially different from the registered design, and whether - and this is apparently for the purpose of damages - whether the defendant had the necessary knowledge that the design was registered at the relevant time.

15. Of course, as appears from the defendant’s own affirmation, what the defendant is saying in effect is that he did not do anything, for he was simply a kind of front, or what he calls a “window” for his Shenzhen company; he was simply there in order to collect and pay money so as to get round the Mainland foreign currency restrictions.  So effectively he did not do anything.  He neither sold nor exported, nor anything else, and he also says that neither he nor Mirage Electronics Industrial Company, that is the company as which he trades in Hong Kong, had any knowledge that the products were infringing products and neither of them was aware of the registered design registration relied upon by the plaintiff.

16.  Looking first at the issues on infringement of copyright.  I have already this morning had to deal, to some extent, with that point because there was an application, which I refused, by the plaintiff to serve voluntary particulars and an affirmation in support of them.  This is secondary infringement.  The infringement of which the plaintiff complains is infringement under section 31 of the Copyright Ordinance, and this is a secondary infringement under section 30:

“infringement occurs when a person who without the licence imports or exports into or out of Hong Kong, otherwise than for private and domestic use, a copy of the work which is and which he knows or has reason to believe to be an infringing copy of the work”.

And we have possessing or dealing with the infringing copy under section 31 which has the same requirement and knowledge.

17. The problem with the plaintiff’s pleadings on the copyright infringement claim is that there is simply no direct pleading of any knowledge at the time of the infringement, which is shown as having taken place on 3 December 2005.  An attempt was made to bring in voluntary particulars of knowledge, which can be ascribed to the defendant after that date in March and in April 2006, but I have excluded that primarily on the basis that knowledge in March or April is really irrelevant to infer knowledge in the previous December.  Whether or not it is irrelevant, in any event, in the light of an allegation or an affirmation by the defendant that he did not know, it is impossible to say that that allegation, or affirmation, is unbelievable when all that the plaintiff can put up to negative it is knowledge which can be ascribed some months later.  So there is obviously, in my view, a triable issue as to the state of the defendant’s knowledge insofar as that relates to secondary infringement under section 31 of the Copyright Ordinance.

18. The next issue goes to the registered design claim. As I have indicated, the defendant is raising the issue of whether it has been validly registered.  Now what we see in the registered design drawings are drawings exclusively of the oval command, control unit or player, or whatever one may wish to call it; there is no indication in those drawings of the other part of the unit, as it is sold, namely the socket unit.  The defendant says that the design is not valid because, in effect, it is the design of only part of a unit because the oval command unit is not an article of manufacture, nor is it made or sold separately.  Reliance in placed, in particular, on the case of Ford Motor Company Ltd’s Design Application [1995] RPC 167.  This is a House of Lords case in which the issue was the interpretation of the word “article” in the corresponding section, 44(1) of the Registered Designs Act 1949. 

19. The Hong Kong Ordinance, section 2, defines “article” as meaning: “Any article at manufacture and includes any part of an article if that part is made or sold separately”.  In the House of Lords case, it was in fact held that the definition of “article” in section 44(1), which clearly did not contain those words, that the definition had to be read as if it meant “if that part is to be made and sold separately”.  Reference was also made to, and a case approved in that House of Lords decision, Sifam Electrical Instruments Co. Ltd v Sangamo Weston Ltd [1973] RPC 899 at 914 in which it was held that in many cases a spare part, in order to qualify, is an article under section 44(1), would have to have an independent life as an article of commerce and not merely be an adjunct of some larger article of which it formed part.  Some explanation of all this appears in Russell Clarke & Howe on Industrial Design, 7th ed. at page 84 paragraph 338 and 339.

 “Really what this case of the Ford Motor Company was about was an application to register designs in respect of components for cars, such as main body panels, doors, bonnet lids, boot lids and windscreens.  Some parts of cars were regarded as simply spare parts and others, such as wing mirrors, seats and steering wheels, might be regarded as proprietary articles which by nature were susceptible of being made and sold separately.”

20. The reason why I have gone into the apparent differences between the two devices at some length is that it appears to me, from looking at the design and the sales brochure of the BEO Center 2, that it is not designed to be made and sold separately from the socket unit and the cable without which it simply cannot work.  That is different from the defendant’s unit which is a stand-alone unit; you plug it, through a transformer, into the mains power and you plug your video screen device, be it a television or computer, or whatever, and your loudspeakers into the back of it and you can use it in that way.  So there is, it seems to me, an argument that the BEO Center 2 is not an article within the meaning of section 2 of the Registered Designs Ordinance because it is not intended to be made also separately.  So there is a triable issue on that point which is raised in the defence. 

21. I have also to deal with the defendant’s point that knowledge, which is a triable issue, is relevant to questions of the claim for damages under the Registered Design Ordinance.  Section 55(1) of that Ordinance provides: “In proceedings for the infringement of a registered design damages shall not be awarded and no order shall be made for an account of profits against the defendant who proves that at the date of the infringement he was not aware and had no reasonable grounds for believing that the design was registered”. 

22.  The defendant, Mr To, as I have indicated, says that he simply did not know about the plaintiff’s registered design.  I take it that that is to be read as meaning that he did not know that the design was registered.  Mr Ho, counsel for the plaintiff, argues that that is incredible given the defendant’s status within the trade and the fact that the plaintiff’s design had been registered for some time.  I do not think that I can say that it is incredible.  Ultimately, it may be one of these things which is not to be believed but I do not think that it can be said to be unbelievable for the purposes of an Order 14 application.

23. Another point which I raised - I am not sure how much value there is in it - but I think it is perhaps relevant: is the question of whether what is pleaded as having happened actually amounted to, on the evidence, an infringement of the registered owner’s rights? Under section 31:

“...the registered owner the exclusive right -

(a) to make in Hong Kong or import into Hong Kong -

(i) for sale or hire; or

(ii) for use for the purpose of trade or business; or

(b) to sell, hire or offer or expose for sale or hire in Hong Kong, any article in respect of which the design is registered and to which that design or a design not substantially different from it has been applied.”

24. What we know to have happened here from the documents which the plaintiff has obtained from the Danish Customs authority, is that the  alleged infringing articles were exported to Denmark with a packing list that seems to come from Mirage Electronics Industrial Company, to be chopped and signed by the defendant; an airway bill that appears to show the shipper as Mirage Electronics (Shenzhen) Company Limited and the airport of departure, Hong Kong; and a pro forma invoice, which appears to come from Electronics (Shenzhen) Company Limited, which, of course, is the Shenzhen company, but to show the beneficiary as Mirage Electronics Industrial Company, that is, the defendant’s Hong Kong company. 

25. I am asked to infer - because exporting is not an infringement, and importing is - that there must have been an import into Hong Kong.  Well, there might have been but there is no definition of “import” and I am not clear whether items which are consigned from Shenzhen and come into Hong Kong, and are then put on an aircraft and shipped out to some other part of the world but do not clear Customs in Hong Kong, are actually imported into Hong Kong.  That is something which might need to be looked into for the purpose of the trial.  I can see that if it could be found that there was, effectively, a direct export/import transaction between Shenzhen and Denmark then the question of import into Hong Kong might not arise.  If there was an import into Hong Kong, I suppose that export would come under the heading of “use for the purpose of trade or business in Hong Kong” and there would be an infringement there, or that would be part of the infringement because it would be imported for the purpose.  But I think the question of import is another question which is not entirely properly answered by the papers before me.

26. There is, of course, also the point made by counsel for the defendant, Mr Ho, that while it is averred that the contract was completed by the shipment from Hong Kong, there is a technical question of whether the contract was completed by the acceptance of the offer and we are not clear where and when the offer was accepted.

27. Overall there seem to be a number of triable issues which are alive here and which make it impossible for me to order judgment or to give judgment under Order 14 in this case.  Because of these I have not considered, and I do not think it is necessary for me to consider, whether there is an obvious or striking similarity, or whether the design is not substantially different from that of the BEO Center.  It may be that a trial court would find that the design is not substantially different but I certainly do not think that I am in a position to say, particularly in the light of the points that I enumerated, that there is no substantial difference at this stage.

28.  Accordingly, it will follow that the plaintiff’s summons for Order 14 will have to be dismissed.  And I say this because the Defence is before the court - the Defence has been filed, and, of course, under Order 14 rule 7 “dismissal is appropriate if it appears to the court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend”.  So it appears to me that dismissal is appropriate here because these points were all raised in the defence and that will be the outcome here.

(Submissions on costs)

29. I think the appropriate course, given that it was a bare defence and the nature of the defence was not properly known until the amended defence was filed, is to order the plaintiff to pay the costs of the Order 14 summons in any event.  Also the plaintiff will pay the costs of the unsuccessful application for leave to file and serve the voluntary particulars, in any event.  As to apportionment, I have recorded that one hour and 15 minutes  of today’s hearing was taken up in dealing with the summons for leave to file the voluntary particulars.