OPERATION SMILE, INC. v. BEAM INTERNATIONAL FOUNDATION LTD

HCA 1026/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1026 OF 2015

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J U D G M E N T

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1.  This is an application under Order 14 for summary judgment in favour of the plaintiff, an American charity, against what was formerly its “offshoot”, to adopt a relatively neutral term for the moment, in Hong Kong.

2.  It is, regrettably, an entirely unnecessary (and no doubt extremely costly) piece of litigation resulting from the defendant charity’s efforts to arrogate to itself the use of the plaintiff’s trademarks and a share of the plaintiff’s goodwill; and on the other side, from the plaintiff’s need to protect that to which it is entitled, the defendant having removed itself from the aegis of the plaintiff charity after many years of development within the founding charity.

3.  The plaintiff is the institution founded by an American surgeon of considerable repute, Dr William Magee, and his wife in 1982 and incorporated in 1987. Its essential charitable purpose is to provide medical treatment for children born with a cleft palate/lip defect in regions or countries with poor infrastructure, where there is inadequate surgeon/patient ratios, or local economic difficulties, or personal financial problems.  It is a non-profit making medical service.

4.  The plaintiff itself is well-known globally and reflects the professional status of its founders.  It established international volunteer missions to provide the surgical repair of such facial defects in “low to middle income countries” facilitating access to safe surgeries regardless of the financial status of patients, coordinates training programmes for physicians around the world, manages programmes to enable such countries to achieve such physical repair on a self-sufficient basis and sponsors a Third World care programme.  This last aspect provides the highest level of care for international cases requiring such surgical intervention.  The following is taken directly from the affirmation of Dr Magee (as has some of the immediately preceding aspects of the charity’s purpose and is set out in this form because it is not disputed by the defendant institution):

“ [The Plaintiff] organizes chapters and foundations worldwide to assist countries in reaching self-sufficiency with cleft surgeries, develops and administers worldwide education and research programs related to cleft issues; and organizes student programs worldwide to develop volunteerism values in young people. The Plaintiff also raises awareness and secures private donations from individuals and corporations to fund its charitable endeavours and more surgeries for patients with cleft lip, cleft palate and other facial deformities.

The Plaintiff operates worldwide through both regional and independently-run foundations set up and organized by the Plaintiff, which foundations do some or all of the following — host the Plaintiff’s mission teams, conduct patient recruitment and help with in-country mission logistics, raising funds, and promoting throughout the year awareness both of the needs Operation Smile serves and how Operation Smile does so.”

The plaintiff’s trademark

5.  Dr Magee and his wife selected “Operation Smile” as the name of the plaintiff.  It is easy to understand the concept reflected by the chosen name.

6.  The plaintiff was incorporated in the United States of America in 1987 and its trademark was registered in 1988.  This registration was replaced by a new one in 1995 and was progressively filed on a worldwide basis from that date.

7.  It has been the proprietor of the trademark “OPERATION SMILE” (No 2000B04291AA) in Hong Kong since 11 November 1998.  There are two variants of the trademark, one with the two words separatedby a motif representing a globe: , and one with the same motif only — no words: .  Their respective number are 301325781 and 301325790.

The plaintiff’s goodwill

8.  Its goodwill has been established by the considerable number of healthcare examinations and charity funded surgeries for children born with the facial defeats, and the charitable activities and promotional activities have involved the expenditure of considerable sums of money, all this to fulfil humanitarian objectives.

The Hong Kong link

9.  In May 1991 Dr Magee and his wife led the plaintiff’s medical mission to Hangzhou in Mainland China.  This had been planned from the previous year when a small fact-finding team, including a surgeon from Mainland China, Dr Han Kai, who had trained under Dr Magee in 1988, made a trip.  The actual mission in 1991 consisted of 41 volunteer medical staff from America, headed by Dr Magee and his wife.

10.  It was partly funded by donations from the public in Hong Kong, one of the leading and most generous and committed sponsors or donors being Mr Tony Fung.  The title of the venture was “Operation Smile’s China Medical Mission” and an appropriate translation in Chinese consisting, it appears, of four Chinese characters was created.  Mr Tony Fung had met Dr Magee in 1989 when the latter was considering fundraising for a mission to Vietnam.  The upshot was that Mr Fung was more interested in the prospect of a mission to Mainland China and there is no doubt that Mr Fung was at the forefront of the support for the mission to Mainland China and at the heart of the fundraising and its promotion.

11.  Unfortunately parts of the affidavit prepared for Sir David Akers-Jones give the impression that in his own affirmation Dr Magee was less than fulsome in his recognition of Mr Tony Fung’s involvement and contribution.  That was unfortunate and misleading. Dr Magee paid proper tribute.  It is in any event a peripheral matter, at best, in the dispute and in my view both unnecessary and irrelevant.

12.  By all accounts the May 1991 mission to China was a success gaining good media coverage including an ATV documentary which was broadcast in Hong Kong.  On the return to the USA the Chinese Embassy gave a reception in honour of the mission’s team.  Dr Magee comments that the 1991 mission, “which took place prior to the incorporation of the defendant laid the foundation for the plaintiff’s goodwill which it enjoys today in Hong Kong and Mainland China.”  There is nothing to gainsay this.  The defendant was incorporated on 4 June 1992 as “Operation Smile - China Medical Mission Limited”.

The establishment of the Hong Kong regional foundation

13.  Prior to the formal setting up of this there had been in April 1992 a further mission to Hangzhou on the Mainland.  This involved over 41 volunteers including 14 American doctors.  One of the patients examined and assessed was Bao Zhiwei whose condition could not be safely dealt with in Hangzhou.  He was thus transferred to the USA, his expenses being funded by pledges from generous donors Mr T T Tsui and Mrs Alice Chiu.

14.  The term “Medical Mission” — an apt one for the charity concerned — regularly featured in the plaintiff’s work on an international basis both as a general term and as a precise title.  Accordingly it became part of the defendant’s title when it was incorporated.  Its founding members were Mr Tony Fung, Mr T T Tsui and Mr Raymond Kwan.  The Memorandum and Articles of Association contained at clause 3(e) as its object:

“To promote, support and further the work and objects of OperationSmile, Inc. USA in Hong Kong, Macao and the People’s Republic of China.”

That requires no further comment or explanation.  The content speaks for itself.

15.  A little over two months later that clause was amended (as was clause 7) to remove the specific reference to the plaintiff’s title.  In its place was a more general and often recognised provision.  Object 3(a) set out the prime object — “to provide specialised medical services to indigent individuals and families in Hong Kong, Macao and the People’s Republic of China.”  There was no change in that.

16.  The alterations reflected a broader activity to support similar, if not identical, charitable objects.  It made no difference to the relationship with the plaintiff.  There may have been some rational political consideration behind it.  There is no substance in any argument to the effect that the amendments reflected some change in the relationship between the plaintiff and defendant.  In fact the history of that relationship down to 2014 shows the Hong Kong foundation inextricably linked to the mother organisation which had initiated it.

17.  The understandable desire of donors/sponsors in Hong Kong (and Mainland China) to have their contributions seen to emanate from the Hong Kong foundation, as opposed to originating from the US founder, in no way altered the status of the Hong Kong Foundation.  It remained inextricably the child of the mother founder.

18.  It continued to have the name of the trademarks and goodwill with the express purpose of furthering the charitable objectives of the foundation.  There is much evidence which endorses this conclusion — in fact it is patently obvious from the media and general promotional activity and publicity that it was so linked with the plaintiff foundation.

19.  It is not necessary to itemise all the evidence in this regard but some of it falls from the mouths of deponents seeking to lend their support to the defendant’s case.

20.  Sir David Akers-Jones exhibited printed material which clearly identified Operation Smile as being:

“ … formed by a group of medical professional volunteers and basedin Virginia in the US. Each year they would visit everywhere in the world to perform free orthopaedic surgeries for children who need such surgeries using their own valuable holidays. In the past two years ‘Operation Smile China Medical Mission’ cooperated with US medical practitioners and visited Hangzhou twice and Meizhou to perform orthopaedic surgeries for over 500 young Chinese patients.”

21.  Mr Tony Fung the generous benefactor at the inception of the proposed mission reflected the position as he saw it, in telling testimony in April 1995:

“ The duty of the employer is to provide the professional service [NOTE!] in keeping with the OSI (Operation Smile Incorporated) spirit of mutual cooperation in order to facilitate the launching of OSI’s future activities in China.”

22.  In May 2009 Mr David Wong, the General Manager of the defendant, in his e‑mail to Cedric Yip, on the topic of “Operation Smile Trademarks/Names”, wrote:

“ … Operation Smile would like to fully protect its names, trademarks and slogans, both in Hong Kong and China. Since your company has already filed for the main logo and main slogan on behalf of our headquarters in the US, we would greatly appreciate your suggestions with some of our regional trademarks as well …

In Hong Kong:

Names

1) Operation Smile

2) Operation Smile China

3) Operation Smile China Medical Mission

4) Operation Smile – China Medical Mission
(This is as registered with Hong Kong Companies Registry)

5) [In Chinese characters]

6) [In Chinese characters]
(This is as registered with Hong Kong Companies Registry)

Logos

1) Operation Smile (already in process, trademark application 301325781)

[Etcetera.]”

(Emphasis added)

23.  The letter contained, with some ironic content in the context of this case:

“ It would be great to know which of these names and logos we must register in Hong Kong and specially in China to protect our IP. As mentioned during our phone conversation, there is some possibility that one of our organization staff in China is planning to register these in their own name and then try to sell/rent it back to us. So we are very concerned about this. We can co‑ordinate this effort with our headquarters in any manner that you think will best protect our assets for the long term.” (Emphasis added)

24.  I consider that this communication is of real significance both in underlining the relationship with “our headquarters” (OSI) and the entirely reasonable fears for the protection of trademarks, names and “our assets for the long term”.

25.  It is incontrovertible that the defendant was under the aegis of the plaintiff and using trademarks etc, and registering the “IP” in Hong Kong and China with the consent of the plaintiff.  They were seen to be and were acting as one and the same.

26.  The defendant was no more than the ‘alter ego’ of the founding plaintiff enjoying the plaintiff’s good will and name and trademarks.  Soon, however it was to try and establish an ‘ego’ of its own, or separate identity unconnected to the plaintiff.

27.  For no doubt a variety of reasons, possibly one being the apprehension expressed in Mr David Wong’s e‑mail of 12 May 2009, the plaintiff gave notice to the defendant by letter dated 30 September 2014 sent to Sir David Akers-Jones as its chairman.  It set out the plaintiff’s position as owner of the intellectual property rights in its name, trademarks and registrations.  It reminded the defendant of the licences and consents which it had hitherto granted to it, and which it now terminated, calling upon it to “cease and desist” from using any of the plaintiff’s intellectual property.

28.  This letter was the consequence of discussions in which the defendant refused to enter a formal licensing agreement.  It was followed up by a letter in similar terms dated 20 October 2014 as a result of the defendant’s actual or threatened infringement of the plaintiff’s intellectual property rights setting out the determination to protect them.

29.  In due course the defendant set out the basis of its justification for seeking to continue to use the intellectual property rights of the plaintiff although on 19 May 2015 the defendant changed its name and registered it as Beam International Foundation Limited, not as subtle or clear-cut change (like its logo in due course), thus removing one of the bones of contention.  Despite the change of name it persisted in using the plaintiff’s name as a prelude to its own domain and website.  That was a blatant misuse, constituting in my judgment a deceit practised on potential donors and sponsors.

The plaintiff’s goodwill

30.  At first, the defendant’s argument appeared to be that it owned the goodwill in Hong Kong and China but ultimately it was altered to an averment that it shared such goodwill with the plaintiff.  This is untenable.

31.  Applying the short proposition of Lord Oliver in Reckitt & Colman Ltd v Borden Inc [1990] 1 All ER 873, and truncating it further, to highlight the considerations:

The plaintiff in a passing off action “must establish a goodwill or reputation attached to the … services he supplies in the mind of the purchasing public by association with the identifying ‘get‑up’ [to the extent] that the get‑up is recognised by the public as distinctive specifically of the plaintiff’s … services.”

“[H]e must demonstrate a misrepresentation by the defendant to the public … leading or likely to lead [it] to believe that … services offered by him are the … services of the plaintiff.”

And: “he must demonstrate that he suffers or … is likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s ‌… services is the same as the source of those offered by the plaintiff.”

32.  The evidence, including that generated by the defendant over the years, is all one way.  There has been, and threatens to continue to be passing off.

33.  The defendant is unable to establish that the plaintiff’s goodwill has been extinguished.  Its post-termination acts misrepresent the relationship ‌— there is now no association between them.  The licence has been revoked.  There is no right to continue to use the plaintiff’s name.  This has effectively been conceded by the change in the name registered.  (See Dawnay Day & Co Ltd v Cantor Fitzgerald International [2000] RPC 669 (CA) and Coles v Need [1934] AC 82.)

34.  Furthermore the defendant cannot establish that the mark or trade name had ceased to be distinctive of the licensor: see Sir Richard Scott VC in the Dawnay case cited —

“ if [the former licensee] wants to continue to use the trading style [of the former licensor], and is not contractually barred from doing so, [he] must … show that his use of the style ‌… has ceased to be distinctive of the licensor.”

Again the evidence is all one way in the plaintiff’s favour.

The plaintiff’s trademarks

35.  There is no defence available to the defendant on this matter.  It has admitted using the plaintiff’s trademarks after termination of the licence.

36.  It has also admitted — it could hardly do otherwise — the use of the plaintiff’s name in a shortened form viz “operationsmile” and “opsmile” as domain names for entry to its website for its new name.  This is a blatant unsubtle attempt to infringe the plaintiff’s intellectual property rights.  Additionally it has made two applications to register trademarks that are unarguably infringing the plaintiff’s trademarks: one, in English, has been rejected; the other in Chinese characters with a form of logo containing again, the four offending Chinese characters: (Nos 303177360 and 303177379).

37.  This second, which has been opposed, is in a state of suspense, but not, I trust, for long, since it clearly is another infringement.

38.  In my judgment the similarity to, and in some respects, the identical reproduction of the plaintiff’s marks registered in Hong Kong, are likely, even if not calculated — and I have some concern that the breaches have been calculated — to confuse the public and even attract donations and sponsorship to an entity, which is now unrelated to the foundation in the United States of America, from benefactors who intend them to be received and used by the original foundation in pursuit of its charitable objectives.

39.  It is important to draw a distinction between the plaintiff, a charity with the specific humanitarian purpose of providing skilled surgery and treatment for people, particularly children, born with defects in countrieswith limited medical resources of skill and amenities, dependent on volunteers and donations in one form or another, and a commercial concern whose purpose is to formulate and protect its profit making business from dishonest competitors who, in effect, seek to pass off their goods as genuine.

Conclusions

40.  The law to be applied in applications for summary judgment under Order 14 is trite law and I have reflected the approach to be adopted in the way I have stated my findings in this case.  I have not sought to effect a trial on affirmations.  Indeed the content of such has, on both sides, been scarcely contentious, but have established essential facts beyond argument. Occasionally a gloss of contentiousness has crept in particularly in those sworn/filed on behalf of the defendant but that has scarcely been germane to the real issues.

41.  I have descended to more detail than the defence to this application warrants, perhaps in part in deference to the approach of Ms Winnie Tam SC who struggled hard and patiently to lend a cloak of reasonableness to the contentions which she had to advance on behalf of the defendant.  However, the history between 1991 and 2014, and the actions and activities, make the conclusions to be drawn self-evident.

42.  Mr Douglas Clark, for the plaintiff, was entitled on this clear evidence to advance a somewhat dismissive approach incorporating nonetheless a consideration of the principles to be advanced.  He would have judged correctly that he had a following wind.

43.  I have applied the time honoured principles to be followed in an application such as this but as indicated earlier it is not necessary for me slavishly to repeat them.  There is no defence to this action.  The lapse of time between the service of the Statement of Claim and the issue of the Order 14 application is not in the circumstances of this case of any significance.  There are probably many reasons why the plaintiff in view of its position as a charity in the United States, Hong Kong and elsewhere decided to hold its hand for a while to see how matters might resolve themselves but it is pointless to seek to identify them.  Its prime objective was, and is, humanitarian medical treatment based heavily on volunteer professional expertise and generous benefactors — the heavy expenditure of funds on litigation is not a priority.

44.  There will be judgment for the plaintiff in the terms prayed for in paragraphs 1, 1A, 2, 3, 4, 5, 6, 7 and 8 of the Statement of Claim.

45.  There will also be an order for costs in favour of the plaintiff against the defendant.  I am conscious that this burden will fall upon the funds donated to the defendant by benefactors and sponsors who may well be largely unaware of the defendant’s rationale.  In relation to that I am compelled to say that in my view it was poor judgment and irresponsible to commit a charity to this litigation on the strength of spurious contentions.

NOTE FOR PRACTITIONER s

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Practitioners should note the following decision and headnote particularly in the light of my comments on the content of two affidavits submitted on behalf of the defendant:

FUNCTION OF WITNESS STATEMENTS

(It applies equally to affidavit and affirmations.)

“Chancery Division Published June 12, 2013	A witness statement should cover only those issues on which the party serving the statement wished that witness to give evidence in chief.  It was not the function of a witness statement to provide a commentary on the documents in the trial bundle, nor to set out quotations from such documents, nor to engage in matters of argument.”
J D Wetherspoon plc v Harris and Others >
Before Sir Terence Etherton, Chancellor Judgment May 1, 2013
[2013] EWHC 1088 (Ch)