NIPPON DENKI KABUSHIKI KAISHA (NEC CORPORATION) v. JR ORIENTAL COMPANY LTD AND OTHERS

HCA 1947/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1947 OF 2008

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J U D G M E N T

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1.  This is an application for summary judgment against the 3rd defendant.  The 3rd defendant has not appeared at the hearing as its solicitors had ceased to act for it in mid-April this year.  Default judgments have already been entered against the 1st and 2nd defendants.

The plaintiff and its trademark

2.  The plaintiff is a Japanese company.  It is the registered proprietor of the trademark “NEC” in Hong Kong and various other countries.  The mark is registered in Hong Kong for, among other things, Class 9 goods which includes CD players, MP3 players and audio electronic equipments.

3.  The plaintiff has made substantial sales of electronic and electrical products in Hong Kong and worldwide under its trademark.  The sales of such products in Hong Kong in 2006, 2007 and 2008 were in excess of HK$31 million, HK$23 million and HK$23 million, respectively.

4.  The plaintiff and its group companies have also advertised its electronic and electrical products in Hong Kong and elsewhere in the world.  The advertising expenses spent in Hong Kong in 2006, 2007 and 2008 were over HK$4.2 million, HK$3.1 million and HK$1.5 million, respectively.

The 3^rddefendant and its activities

5.  The 3rd defendant is a Hong Kong company and is a subsidiary of a listed company.  The plaintiff pleaded that the 3rd defendant has manufactured, distributed and sold NEC brand products purportedly under a licence from the 1st defendant but that was not authorised by the plaintiff.

6.  The plaintiff further pleaded that the 1st defendant was an appointed sub-distributor of authorised NEC branded CD players and related equipment, speakers and IT-related equipment manufactured by or to the order of the plaintiff’s subsidiary in Hong Kong, the Mainland and Taiwan and a provider of maintenance and customer services relating to those products in Hong Kong.  Such right lasted between April 2002 and 31 July 2003.  Such sub-distribution right did not include any right to manufacture or authorise or license the manufacture or distribution of any product under the NEC trademark.  Such right was also terminated on 31 July 2003.

7.  The plaintiff further pleaded that the 1st and 3rd defendants entered into two agreements dated 25 April 2004 whereby the 1st defendant purportedly authorised and commissioned the 3rd defendant to manufacture NEC branded portable CD players and mini-stereos.  However, the 1st defendant, in so authorising and commissioning the 3rd defendant to manufacture such goods, was using the plaintiff’s NEC trademark in the course of its trade or business and authorising its use by the 3rd defendant without the licence or consent of the plaintiff.

8.  The plaintiff further pleaded that the 3rd defendant had prior to the issue of the writ on 9 October 2008 infringed the plaintiff’s trademark by manufacturing, supplying and distributing portable CD players and mini-stereos under the NEC trademark in the course of trade.

9.  The plaintiff further pleaded that the manufacture, supplying and distribution of portable CD players and mini-stereos under the NEC trademark also constituted passing off as it misrepresented to the public that its goods were those of the plaintiff or that the 3rd defendant was authorised by the plaintiff to manufacture, supply and distribute such goods under the plaintiff’s trademark.

10.  The plaintiff also pleaded the 3rd defendant’s refusal to acknowledge the plaintiff’s claims as evidence showing the 3rd defendant’s intention to continue with the acts complained of. 

11.  The plaintiff also referred to legal proceedings brought by the 1st defendant in Tokyo wherein the 1st defendant’s claim of licence right to use the NEC trademark was dismissed.

The plaintiff’s claim against the 3^rddefendant

12.  The plaintiff therefore seeks an injunction against the 3rd defendant from carrying on such acts and for damages or account of profits at the plaintiff’s option. 

The 3^rddefendant’s defence

13.  The 3rd defendant has filed a defence on 18 December 2008.  It admitted that the plaintiff is the registered proprietor of the NEC trademark though it did not admit that the plaintiff has acquired a substantial reputation and goodwill in Hong Kong for electronic products under its name and trademark.  It also admitted that it had during the material times manufactured, distributed and sold NEC branded products under licence from the 1st defendant.  It denied that it had used the NEC trademark without the licence or consent of the plaintiff.

14.  It further pleaded that even if the 1st defendant had used the NEC trademark without the plaintiff’s licence or consent, it was not a matter known to or should have been suspected by the 3rd defendant or could have been discovered by the 3rd defendant with reasonable diligence. 

15.  Finally, the 3rd defendant relies on the plaintiff’s delay and acquiescence as a defence as the 3rd defendant’s acts took place as early as May 2004.

16.  The plaintiff issued a summons for summary judgment on 5 October 2009. 

The plaintiff’s evidence

17.  The plaintiff filed an affirmation by a Mr Fujio Okada, an associate senior vice president of the plaintiff, in support of the application.  Mr Okada provided the facts in his affirmation to verify the matters pleaded in the statement of claim.  He also referred to various legal actions taken by the plaintiff in Taiwan and several big cities in the Mainland to fight against the activities of the 1st and 2nd defendants in these jurisdictions.  These actions produced successful results for the plaintiff.

18.  On delay and acquiescence, Mr Okada said that the plaintiff only became aware of the 3rd defendant’s unlawful acts in April 2005 despite it having started since May 2004.  He further said that the infringement acts relating to the 1st and 2nd defendants were very extensive.  There were at least 17, 11 and 4 entities in the Mainland, Taiwan and Hong Kong respectively that were involved unlawfully in the manufacture, sale and distribution of goods bearing the NEC trademark.  The plaintiff has since 2005 been taking civil actions and assisting the authorities in criminal actions diligently and continuously against the infringers in these jurisdictions.  This is an ongoing process.

19.  He also said that the plaintiff had adopted a sensible approach in its enforcement action against the 3rd defendant to avoid unnecessary costs and stay of proceedings.  The plaintiff has also given notice to the 3rd defendant in July 2008 about the judgment given in March 2008 in Tokyo in the 1st defendant’s claim that was in favour of the plaintiff, but the 3rd defendant refused to cooperate with the plaintiff.

The 3rd defendant’s evidence

20.  The 3rd defendant filed an affirmation by its deputy general manager, one Mak Wai-man, on 19 November 2009 to oppose the application.  Mr Mak said the negotiation for the rights for the 3rd defendant to manufacture, distribute and sell NEC branded products was undertaken by the then marketing manager of the 3rd defendant, one Mr Chan, who was no longer in the employ of the 3rd defendant.

21.  He said in about December 2003 Mr Chan at the introduction of one Chan Chin Tin, of a company called Kabushiki Kaisha Toma Japan, negotiated with the 2nd defendant for the grant of sub-licences of the abovementioned rights.  During the negotiation, the 2nd defendant gave two documents in Japanese to Mr Chan to demonstrate that the 2nd defendant could grant sub-licences to the 3rd defendant.  Neither Mr Chan nor Mr Mak was conversant with Japanese.

22.  Though they did not doubt the authenticity and represented effect of these documents, Mr Chan, in order to protect the 3rd defendant, sought further confirmation from the 2nd defendant on whether the 1st defendant could grant a sub-licence.  The 2nd defendant then gave numerous confirmations verbally and by e-mail and also produced a Chinese deed of cooperation made between the 1st defendant and one Kaejinn International Company Limited.

23.  The 3rd defendant then made an agreement with the 1st defendant on 25 April 2004 for the 3rd defendant to manufacture NEC branded products.  The 3rd defendant laboured and operated under the premise that both the 1st defendant and Kaejinn were authorised by NEC.  The 3rd defendant then received orders from Kaejinn through the said Chan Chin Tin.

The legal aspects

24.  I now deal with the legal aspects.  I have already referred to the 3rd defendant’s admission that the plaintiff is the registered proprietor of the NEC trademark in Hong Kong.  For the purpose of infringement of trademark, I will refer to section 18(1) of the Trade Marks Ordinance, Cap. 559 which provides:

“(1) A person infringes a registered trade mark if he uses in the course of trade or business a sign which is identical to the trade mark in relation to goods or services which are identical to those for which it is registered.”

25.  The 3rd defendant does not admit the plaintiff’s goodwill in the NEC trademark.  However, on the evidence of Mr Okada, I do find that the plaintiff has acquired a substantial reputation and goodwill in Hong Kong under its name and the NEC trademark in connection with electronic and electrical products. 

26.  There is also no dispute that the 3rd defendant used the NEC trademark in the course of trade as it manufactured, distributed and sold thousands of electronic and electrical products under this mark.

Analyses and decision

27.  Though the 3rd defendant has not appeared, I would still consider its grounds of defence.  They have been summarised by counsel for the plaintiff as follows:

“(1)   The 3rd Defendant had no knowledge that the 1st Defendant used the NEC mark without a licence or consent of the Plaintiff.

(2) The 1st Defendant’s absence of authority to use the NEC mark was not a matter which the 3rd Defendant knew, should have suspected and/or could have discovered with reasonable diligence.

(3) The 3rd Defendant is entitled to rely on delay and acquiescence as a defence since the infringing activities took place as early as May 2004.”

No knowledge of the 1st defendant’s lack of authority and could not have discovered it with reasonable diligence. 

28.  It is well settled law that innocence on the part of the infringer is not a defence to liability for damages for infringement of trademark.  Different considerations may apply for an account of profits (see Gillette UK Limited v Edenwest [1994] RPC 279 at 290, line 1 to 291, line 10 and Creative Technology Limited v Videocom Technology Limited & Another, HCA1434/2002 at paragraph 38).  The same applies to passing off (see Gillette UK Limited at 291, line 12 to 293 and Creative Technology Limited at paragraph 38).

29.  Since the 3rd defendant has not even appeared at the hearing, I would not consider its claim of innocence.  I would therefore not exclude the plaintiff’s claim for account of profits.  That disposes of the two grounds of defence based on knowledge.

Claim for injunction

30.  Regarding the claim for injunction, the 3rd defendant has relied on two Japanese documents but the responsible officers were not conversant with Japanese.  Its quest for further confirmation resulted in the provision by the 1st defendant of an agreement that the 1st defendant made with a Taiwanese company.  There was no evidence showing any confirmation from independent sources.  The 3rd defendant had also not procured any translation of the Japanese documents to satisfy itself of their meaning and effect.  The 3rd defendant had also accepted the claims of the 1st and 2nd defendants without confirmation from independent source or authority. 

31.  Even accepting the evidence of Mr Mak, I think the attitude of the 3rd defendant towards intellectual property rights is, as counsel for the plaintiff put it, cavalier.  I therefore consider that an injunction against the 3rd defendant for infringement of trademark and passing off is appropriate.

Delay and acquiescence

32.  On delay and acquiescence, I accept that the plaintiff has upon discovery of the infringement activities launched various enforcement actions in Taiwan and several big cities in the Mainland.  It had to deal with the Tokyo proceedings as brought by the 1st defendant as well.  I do not think it was too late for it to have started this action in October 2008 after it had received a favourable judgment in March 2008 in the claim brought by the 1st defendant in Tokyo.

33.  The plaintiff had also sent investigators to investigate the infringement activities of the 3rd defendant in April 2006.  It had through its solicitors sent a letter dated 26 September 2006 to the 3rd defendant seeking the latter’s cooperation to resolve the infringement problem, but the 3rd defendant did not cooperate.  There is no evidence that the plaintiff  had acquiesced in the 3rd defendant’s infringement activities.

Judgment

34.  In the premises, the 3rd defendant has furnished no ground of defence.  I therefore give judgment to the plaintiff as prayed in the summons.  I also make an order nisi that the 3rd defendant do pay the costs of this action to the plaintiff.  And I now proceed to assess the amount of costs payable also on a nisi basis.