CHUNG FAT ENGINEERING LTD. v. YUNG CHUNG t/a KONG NGAI ENGINEERING CO. (a firm)

1997, HCA 8037

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.A8037 OF 1997

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J U D G M E N T

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1. In this action, the plaintiff claims against the defendant in infringement of copyright in 12 drawings for clothes drying stands and component parts thereof and in misrepresentation. The Writ herein was issued on 31 July 1997.

The Facts

2. There is only 1 witness at the trial and that is Mr Andy Tong, the plaintiff's director. The defendant had called no witness. Much of the background facts are not in dispute.

3. Mr Yung Chung ("Yung") was formerly the sole proprietor of a business known as Chung Fat Stainless Steel Works Company ('the Business"). The Business traded mainly in the manufacture and sale of clothes drying stands. Mr Andy Tong ("Tong") and Yung came to know each other in the early part of 1991.

4. In about March 1991, it was orally agreed between them that Tong would acquire 20% of the shares in the Business to be held in his wife's name at the consideration of $200,000. Since about that time, Tong began to be involved in the Business.

5. On 13 August 1991, Tong and Yung signed a Chinese memorandum of agreement whereby Yung agreed to sell his remaining 80% of the shares in the Business to Tong's wife at the price of $800,000. It was stipulated in this memorandum that the formalities of the transfer were to be handled by Messrs. Johnson Stokes & Master, solicitors.

6. On 28 August 1991, Yung, Tong and his wife and the plaintiff executed a formal agreement for the transfer of the Business from Yung to the plaintiff, then known as "Wentry Engineering Limited", at the price of $930,000 ("the 1991 Agreement"). Under the 1991 Agreement, Yung sold to the plaintiff the goodwill of the Business, including the right to trade under the name of "Chung Fat"; the plant, machinery, tools and equipment and the stocks of raw material, component parts, semi-finished and finished products of the Business. Most importantly, Yung also sold to the plaintiff "all copyright beneficially owned by Chung Fat" (i.e. the Business) "(including but not limited to that in respect of certain design drawings for designs of stainless steel clothes drying stands, copies of which are attached hereto as Schedule 1) of which the Vendor" (i.e. Yung) " was the sole proprietor immediately prior to the Effective Date ("the Copyright")": see clause 1.01(b). The effective date under the 1991 Agreement is 1 July 1991. There are a total of 12 drawings attached to the 1991 Agreement as Schedule 1. These 12 drawings form the subject matter of this action and they appear as schedules 1 to 12 to the Re-Re-Amended Statement of Claim ("the plaintiff's drawings").

7. Under clause 5.01 of the 1991 Agreement, Yung gave a number of undertakings and warranties to the plaintiff. The relevant one for the purpose of this action is in sub-clause (g). There Yung warranted that the Business was the sole legal and beneficial owner of the copyright defined in clause 1.01(b) as set out above. Further under clause 6.02, Yung undertook that he shall not, save with one limited exception, for a period of 3 years after the date of the 1991 Agreement engage in the manufacture or sale of clothes drying stands whether in Hong Kong or elsewhere in the PRC.

8. According to Tong, the turnovers of the Business were very promising at the time because the Stands it produced were very unique. What happened was Yung was awarded the contracts to supply clothes drying stands for mounting onto the external walls of 2 private housing estates in North Point, known as "Belford Gardens" or "Pak Fook Gardens" (百福花園) and "Kin Way Gardens" (健威花園). As a result, he devised clothes drying stands, the frames of which were made from bending single stainless steel or aluminum tubes into "U" shapes. Tong had referred to the shape of the frames of the stands as rectangular. This is because a base bar would be welded to the "U" shape frame, resulting in a rectangular shape that has round corners. It is also Tong's evidence that previously clothes dryings stands were made from joining several metal tubes together to form a rectangular shape.

9. Tong said that Yung's clothes drying stands became very popular and were referred to as the "Pak Fook" (百福型) type and "Kin Way" type (健威型). The former refers to stands mounted in a forward manner whereas the latter refers to stands which are mounted in a sideway manner. In the course of time, Yung devised a third type known as "luxury" type (豪華型). It is similar to the "Pak Fook" type in that it is forward mounting, but it has longer leg stands so as to fit in the designs of public housing estates. The Business was trading in these types of clothes drying stands and was very profitable. It was because of this and the sound prospect of the Business that prompted Tong to acquire the Business from Yung.

10. Tong also said that he was led by Yung to believe that Yung had exclusive rights in the manufacture of these types of clothes drying stands. He said Yung had shown him catalogues describing these stands and also a Writ which Yung issued in 1987 against a third party for infringement of his copyright in 5 drawings depicting the "Pak Fook" and "Kin Way" types. These 5 drawings were made by a Mr Lee Kin Ka, who had assigned to Yung his rights in them under an assignment dated 14 April 1987. The 5 drawings form part of Schedule 1 to the 1991 Agreement and were also attached to the re-Re-Amended Statement of Claim as schedules 1 to 5.

11. Not long after the plaintiff purchased the Business from Yung and in November 1991, the plaintiff commenced proceedings under HCA 9088/91 ("the 1991 Action") against Yung for breach of the 1991 Agreement on the basis that Yung had engaged in the manufacture and trading of clothes drying stands and had solicited business from the former customers of the Business. The 1991 Action was eventually compromised with an injunction being granted by consent on 8 October 1992 restraining Yung from dealing and trading in clothes drying stands and soliciting customers of the Business for the period up to 28 August 1994.

12. In this action, the plaintiff claims that as a result of the 1991 Agreement, the plaintiff has become the owner of the copyright subsisting in the plaintiff's drawings. It also claims that the defendant had since 1994 engaged in the production and sale of products that infringe the copyright in the plaintiff's drawings. Alternatively, the plaintiff says, if the defendant disputes that copyright subsists in the plaintiff's drawings and/or that the plaintiff is the owner of the rights and the Court finds for the defendant, then Yung is liable in misrepresentation by reason of clause 5.01 of the 1991 Agreement.

13. Of the factual matters, only one of them is in issue and it is this. According to Tong, in September 1994, the plaintiff arranged for the purchase from the defendant 3 clothes drying stands (exhibits P1a, P1b and P2). These stands had since been placed outside the plaintiff's office. The defendant denied that these stands were bought from him.

14. This part of Tong's evidence is clearly hearsay in that he was not the person who went to the defendant's premises to make the purchase. There are also inconsistencies between Tong's oral evidence and his witness statement and the document before the Court. In his witness statement, Tong referred to the purchase being carried out by "an agent". In his oral testimony, he however said that the person was an employee of the plaintiff, a Mr Wong Kwok Sum. No details of this Mr Wong were given. Neither had Mr Wong testified and there is no explanation for this. It is Tong's evidence that Mr Wong remained an employee of the plaintiff up to the time of the trial. This will suggest that Mr Wong should be available as a witness, and it is very strange that he was not called, given that the defendant had clearly in the pleading put the plaintiff to strict proof of this alleged purchase. Further, the receipt referred to by Tong in his evidence shows that the sale was made to one "Sun Lung Hing" (新隆興). There is no explanation given as to why it was that the receipt was made out to Sun Lung Hing when allegedly the purchase was made by Mr Wong. The relationship, if any, between Sun Lung Hing and Mr Wong had not been explained either.

15. It is also most unusual that the plaintiff would keep these stands outside its office for more than 5 years. It is Tong's case that after warning letter from the plaintiff's solicitors in 1994, the defendant had discontinued his infringing activities and the plaintiff therefore did not take further action. That being the case, there is no apparent reason for the plaintiff to keep these 3 rather bulky stands and place them outside its office for all these years.

16. Considering the above matters, I am not convinced that the plaintiff has discharged its onus in establishing on a balance of probabilities that the 3 stands were bought from the defendant.

17. Accordingly, the only stands for the purpose of determining whether the defendant had infringed the plaintiff's copyright are those purchased from the defendant on 12 May 1997 and produced as exhibits P3 to P5.

Misrepresentation

18. It is convenient to dispose of this head of claim first because it is a straightforward one.

19. In paragraph 3 of the Statement of Claim, the plaintiff pleaded the 1991 Agreement. Paragraphs 4 and 5 of the Statement of Claim then referred to clauses 1.01 and 5.01 of the 1991 Agreement. Paragraph 6 went on to plead that "the plaintiff is and at all material time since 1st July 1991 has been the owner of the Copyright subsisting in original artistic works in respect of 9 designs of clothes drying stands and component parts thereof". It then proceeded to set out the 12 schedules of drawings as the particulars of the artistic work.

20. The defendant under paragraph 4 of the Defence expressly admitted paragraphs 3 to 5 of the Statement of Claim. The defendant, however, went on to state the circumstances surrounding the execution of the 1991 Agreement in paragraph 5, which reads as follows:

"However, in respect of paragraphs 3,4, and 5 of the Statement of Claim, the Defendant avers that at the solicitors' office on 28th August 1991 :-

(a) before signing the agreement dated 28th August 1991, there was a doubt among all parties of the said agreement in respect of whether Chung Fat had copyright for drawings attached to Schedule 1 of the said agreement or whether they should be formally registered;

(b) the solicitors opined that the said drawings needed not be registered and that he who drew the drawings had their copyright; and

(c) after Mr. Yung Chung signed the said agreement, he was not given any copy of it."

21. As to paragraph 6 of the Statement of Claim, the defendant also admitted it in paragraph 6 of the Defence. In the same paragraph, the defendant went on to repeat paragraph 5 of the Defence and aver that all the drawings were not drawn by Yung, giving also the identities of the authors of the drawings. The defendant further averred that the plaintiff had only produced products similar to the drawing in schedule 2 of the Statement of Claim, but not identical to any of the drawings in the 12 schedules of the Statement of Claim.

22. The subsequent amendments to the pleadings do not affect the position with regard to these paragraphs.

23. By way of the Re-Amended Statement of Claim, the plaintiff introduced an alternative claim of misrepresentation under a new paragraph 14A. In setting out the representations said to have been made by the defendant, the plaintiff simply repeated paragraphs 4 and 5 of the Statement of Claim, which as mentioned earlier, are references to clauses 1.01 and 5.01 of the 1991 Agreement. It was then pleaded that the representations were false. No particulars of falsity were, however, given.

24. It transpires from the opening submission of the plaintiff's counsel that the allegation of falsity of the representations stems from paragraphs 5 and 6 of the Defence. Counsel also intimated that the primary cause of action of the plaintiff is in misrepresentation. In his closing submission, counsel for the plaintiff adopted his opening submission on this part, but observed that since counsel for the defendant had conceded that copyright subsisted in the 12 drawings in schedules 1 to 12 of the Statement of Claim, it was no longer necessary for the plaintiff to proceed with this part of the claim

25. It is obvious that the plaintiff was completely misconceived in this part of the claim in that there is no foundation for it at all. The defendant did not in his Defence deny the plaintiff's pleas that it has since the 1991 Agreement been the owner of the copyright in the 12 drawings, and that Yung had under the 1991 Agreement given the warranty stated in clause 5.01 thereof. Quite the contrary, the defendant had admitted these pleas. Upon a reading of the Defence, it is also clear that the issue between the parties on the copyright is whether the defendant's products constitute an infringement of the plaintiff's right. No issue turns on the plaintiff's ownership of the rights in the drawings. There is thus no room for suggesting any falsehood in either clause 1.01 of the 1991 Agreement, whereby Yung sold the Business and the rights in Schedule 1 thereto, or clause 5.01, whereby Yung warranted, inter alia, that the Business was the owner of the said rights. It is also incorrect to suggest that counsel for the defendant had "conceded" that copyright subsisted in the drawings, for the point has never been contested, hence never been in issue right from the beginning.

26. The claim in misrepresentation, whether as a primary or alternative claim, is therefore bound to fail.

Infringement of Copyright

27. The only dispute between the parties on this part of the claim is whether the defendant's products are 3-dimensional reproductions of the plaintiff's drawings so as to constitute an infringement of the plaintiff's copyright therein. The relevant products for determination of this issue are exhibits P3 to P5. The pleading has also made reference to a schedule 13, which was added when the Statement of Claim was first amended in October 1998. Nothing additional has ever been annexed to the Statement of Claim, despite the amendment. It remains unclear what this schedule 13 is referring to. Therefore in determining the issue of infringement, the Court is confined to the plaintiff's drawings.

28. Infringement can take the form of primary infringement and secondary infringement. The present case is only concerned with primary infringement, namely, copying. Section 23(2) of the Copyright Ordinance, cap. 528 provides that copying means reproducing the work in any material form. There can be no dispute, and the defendant does not dispute, that copyright in 2-dimensional drawings can be infringed by making 3-dimensional functional articles: see section 23(3) of Copyright Ordinance.

29. To prove copying, the plaintiff has to show that there is certain degree of objective resemblance between the original work and the copy, and the latter is a copy in the sense of its being derived from the original. It is not necessary for an entire work to have been copied for there to be an infringement. It is sufficient if a substantial part has been taken in the sense that an important part or component or a clearly recognizable part has been taken. It is thus not just a question of quantity but also of quality.

30. It is therefore necessary to approach the present case by firstly ascertaining what is the important part or distinguishing feature of the plaintiff's drawings and what is it that the defendant is alleged to have copied.

31. It is useful at this juncture to state the well-known principle that copyright only protects the form in which something is expressed and not necessarily the underlying idea. Indeed, it is often said that while an idea may be protected by patent or the obligation of confidentiality, there is no copyright in an idea.

32. This concept is important because he emphasis throughout Tong's evidence is that the clothes drying stands designed and devised by Yung, from which the plaintiff's drawings derived, were unique in that their frames were made from bending single metal tubes into what Tong described as rectangular shapes. Before Yung came up with the "Pak Fook" and "Kin Way" types, the clothes drying stands on the market were all made from fitting several metal tubes together with bolts and nuts. He went so far as saying that Yung told him that he had exclusive rights in the bends because a special set of moulds had been created for bending the metal tubes. Clearly, Tong had mixed up copyright with other rights in, for example, patent or industrial design. It is also plain that what Tong regards as distinct and unique is the idea of bending a single metal tube into a rectangle. That, however, is not the subject matter of the copyright enjoyed by the plaintiff. The plaintiff's copyright is in the expression of this idea in the plaintiff's drawings. Having listened to the evidence of Tong, especially his evidence in cross-examination, I have a distinct feeling that he has an erroneous belief that the plaintiff's right is in the bends of the frames, that the plaintiff owns the idea of bending a single metal tube to form the frame of clothes drying stand, and that it will be an infringement of the plaintiff's right to take this idea and manufacture stands that have frames made from bending single metal tubes. That erroneous belief also underlies the fundamental weakness in the plaintiff's case.

33. As said, the plaintiff's copyright is not in the idea of bending one metal tube to form the frame of the clothes drying stand nor in the plaintiff's stands that have frames made from bending single metal tubes. The plaintiff's copyright is in the expression of the idea in the drawings. The idea is expressed in the plaintiff's drawings, notably schedules 1 to 7, by depicting a rectangular frame with either 2 or 4 smooth round corners. Within the frames, the drawings show 4 or 5 dotted or continuous lines that represent the nylon drying lines. The distinctive features of the plaintiff's drawings are therefore the rectangular frame and the smooth round corners. It is Tong's evidence that the primary purposes of the plaintiff's drawings were for showing to potential customers for viewing and for annexing to tender applications of the plaintiff. Hence, it is the appearance of the rectangular shape and the smooth round corners as depicted in the plaintiff's drawings that is material.

34. The next question for determination is whether the defendant's products, exemplified by exhibits P3 to P5, bear any close resemblance to the depictions in the plaintiff's drawings. In his closing submission, counsel for the plaintiff submitted that P3 to P5 are infringements of schedules 7, 5 and 2 of the Re-Re-Amended Statement of Claim respectively. The comparison is therefore between P3 to P5 and schedules 7, 5 and 2 respectively.

35. There is no doubt that exhibits P1 to P3 carry 2 smooth round corners, which is achieved by bending a single metal tube into either a wide "U" or an elongated "U" shape. The defendant had contended that the arcs or corners of exhibits P1 to P3 are wider and larger than those depicted in the plaintiff's drawings. That, in my view, is immaterial in that it only goes to the dimensions but does not affect the appearance of the smooth round arcs or corners. What is obvious is that the defendant has taken the idea of bending one metal tube to make the frame of the Stands. That, as mentioned earlier, is not per se an infringement of the plaintiff's copyright.

36. Other than the round corners, there is no similarity between exhibits P3 to P5 and the stands depicted in the 3 drawings. On the contrary, there is a distinct difference between them. In all of exhibits P3 to P5, there is a bar inserted in the middle of the "U" shape frame. In the case of P3 and P5, it is a "T" shape bar, and in the case of P4, it is a single middle bar. No such bar appears in any of the plaintiff's drawings. As a result of the insertion of the "T" or middle bar, the frames of the defendant's products are not rectangular in shape and have a different appearance.

37. In Entec (Pollution Control) Ltd v. Abacus Mouldings [1992] FSR 732, the plaintiff's copyright is in very simple drawings for septic tanks. The purpose of the drawings was to act as aides to understanding the dimensions. The basic shape was a commonplace ovoid, which was copied by the defendant. The defendant had however adopted a different design for the internal parts and used necks with a different type of cross-section. In allowing the appeal against the grant of an interlocutory injunction, Nicholls L.J. (at p. 348) pointed out that that the idea of using an ovoid container cannot be the subject matter of copyright shape and the pertinent question is whether the defendant had taken that which was visually significant in the drawings.

38. Applying this principle, I am of the view that the defendant in the present case has not taken a visually significant part of the plaintiff's drawing. The defendant's products have not taken the rectangular shape, which is a distinctive part of the plaintiff's drawings. Further, the insertion of a "T" or middle bar gives to the defendant's products an appearance that stands out from the depictions in the plaintiff's drawings.

39. The departure from the rectangular shape is significant given the simplicity of the plaintiff's drawings, notably schedules 7, 5 and.2. This is because the simpler a drawing, the more closely it will have to be imitated before there can be infringement of copyright. It will not be sufficient if what is taken is merely a general idea. In Entec (Pollution Control) Ltd, supra, Nicholls L.J. remarked (at p.349) that :

"However irritating the plaintiffs may find the defendants' copying activities, it must be appreciated that copying is not by itself wrongful. It is only wrongful if the copying infringes a legal right of the plaintiffs. Here there is no question of the defendants' goods being made or sold in such a way that they are likely to be confused with the plaintiffs' goods : there is no question of passing off. Nor is there any question of infringement of any patent. The plaintiffs' case rests exclusively in copyright. The plaintiff's case is founded on little sketches and diagrams. But for those the plaintiffs would have no case at all. However, these drawings are so simple that the figures and dimensions which accompany them might well have been calculated without any accompanying drawings at all. Thus, in that respect, it may be little more than fortuitous that there were ever any drawings in this case. To that extent the plaintiffs may be fortunate in having an arguable cause of action at all."

40. These remarks apply with all force in the present case.

41. In meeting this apparent difficulty in the plaintiff's case, Tong had repeatedly said in his evidence that at the time of the making of the 1991 Agreement, Yung and the Business were already manufacturing stands that carry middle bars. Tong also said that the plaintiff would at the requests of its customers, added middle bars to the stands sold by the plaintiff. These are matters which did not feature in his witness statement, despite that the issue of dissimilarity is plain from the pleadings and the discovery. Even assuming that what Tong said is true, that does not advance the plaintiff's case in that the Court is concerned with a comparison of the defendant's products with the plaintiff's drawings, in which copyright subsists, and not a comparison with the plaintiff's products, which is not the subject matter of the protection by copyright. For the same reason, I do not accept the submission of the plaintiff's counsel that exhibits P3 to P5 are substantially similar, if not identical to exhibits P8 to P10, which are the plaintiff's products.

42. The defendant has suggested that his products were derived from the 6 drawings attached to the Re-Amended Defence. They are said to have been drawn by the defendant after 1994. Counsel for the defendant further submitted that insofar as the plaintiff is producing stands that have "T" or middle bars, such as exhibits P8 to P10, the plaintiff is copying from the defendant and is infringing the defendant's drawings attached to the Re-Amended Defence. Since the defendant did not testify nor call any witness, there is simply no evidence to provide the link between the defendant's products and the drawings attached to the Re-Amended Defence and to support the submission relating thereto. The Court is therefore not in a position to consider or adjudicate on these points.

43. I wish also to point out that had there been a close similarity between the defendant's products and the plaintiff's drawings, it would not be difficult to infer that the products were derived from the plaintiff's drawings or to negative mere collateral ownership, having regard to the history between the parties and Yung's previous involvement in the Business. I, however, do not agree with counsel for the plaintiff that I can draw an adverse inference from the mere fact that the defendant had elected not to adduce any evidence.

44. In summary, the plaintiff has failed to establish that the defendant's products are 3-dimensional reproductions of the plaintiff's drawings. It follows that it has failed to make out a case of infringement by the defendant of the plaintiff's copyright.

Costs

45. Counsel for the defendant had submitted that costs in this action should be awarded on an indemnity basis, having regard to the conduct of the plaintiff throughout these proceedings, which he said, amounts to an abuse of the process.

46. I accept that the plaintiff had proceeded with this action in rather dilatory and haphazard manner. First of all, there had altogether been 3 amendments to the Statement of Claim, yet the pleading is still incomplete in that the so-called "schedule 13" remains to be annexed to it. Even at the trial, the plaintiff did not bother to produce or show to the Court this missing schedule 13.

47. Secondly, the scope of the plaintiff's copyright remained unsettled even at the trial as manifested by the very late attempt to further amend the Statement of Claim to add a schedule 14 in the course of the trial. I had dealt with this matter by way of a separate Ruling and I do not wish to repeat the details of it. It is suffice for me to point out that the proposed schedule 14 was not available when the application to add it was made. It is a fair comment when counsel for the defendant submitted that the plaintiff simply did not know the substance and basis of its case.

48. Thirdly, this action started as an action in infringement of copyright, but after exchange of witness statements, the alternative clause of action in misrepresentation was added with no particulars in support of it. There was also no further or supplemental witness statement from the plaintiff to substantiate this plea. Indeed, as pointed out in the earlier part of this Judgment, the plea lacks proper factual and legal foundation. The plaintiff has thus unnecessarily complicated the action and the issues by adding a wholly unmeritorious claim.

49. Fourthly, as late as the first day of the trial, the plaintiff disclosed for the first time certain documents, which show that the copyright of part of the plaintiff's drawings originally vested in Yung. This again demonstrates the haphazard manner in which the plaintiff goes about this action.

50. Fifthly, there is a history of delay throughout the action. The defendant had twice had cause to apply to dismiss the action for want of prosecution. After an order for setting down was made, the plaintiff took no step to set the action down for trial within the prescribed time. The action was only set down nearly 3 months after the order for setting down was given. Even then, the plaintiff applied unsuccessfully for the case to be removed from the warned list some 3 months later. The plaintiff has plainly failed to proceed with due diligence and has unduly prolonged the action.

51. Considering all these factors, I agree that this is an appropriate case for the plaintiff to be visited with a costs order higher than the usual party-and-party basis. The costs of this action should be awarded on an indemnity basis.

Conclusion

52. For the reasons above, the plaintiff's claim herein is dismissed. There will be an order nisi that the plaintiff pays the defendant the costs of this action to be taxed on an indemnity basis if not agreed. The order nisi to be made absolute 14 days after the handing down of this Judgment.