|
HCIP 34/2021
[2021] HKCFI 3137
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
INTELLECTUAL PROPERTY PROCEEDINGS NO. 34 OF 2021
_____________
| BETWEEN |
|
|
| |
BIOZEAL, LLC |
1st Plaintiff |
| |
MURRAY COLIN CLARKE |
2nd Plaintiff |
| |
and |
|
| |
NATURE’S STORY COMPANY LIMITED |
1st Defendant |
| |
PELICAN HILLS COMPANY LIMITED |
2nd Defendant |
_____________
Before: Hon Lok J in Chambers
Dates of Hearing: 28 & 30 September 2021
Date of Decision: 30 September 2021
Date of Reasons for Decision: 20 October 2021
_________________________
REASONS FOR DECISION
_________________________
1. This is the Plaintiffs’ application for interlocutory injunctions and ancillary relief against the Defendants pursuant to O 29 of the Rules of the High Court (Cap 4A) by way of summons dated 5 July 2021 (“the Summons”). In the hearing on 30 September 2021, subject to the payment of HK$ 5 million into court as fortification as to undertaking as to damages, I granted the application subject to some revision in the terms. I now give my reasons.
BACKGROUND AND THE BASIS OF THE PLAINTIFFS CLAIMS
(i) The Plaintiffs and the ChildLife products
2. The 2nd Plaintiff, Dr Murray Colin Clarke, is a renowned paediatrician in the United States. Since 1996, the 2nd Plaintiff had started formulating nutritional and dietary supplements for children after noticing a dramatic increase in the number of patients with illnesses such as immune deficiencies, allergies and eczema. The first complete line of nutritional supplements made specifically for infants and children were subsequently developed under the brands “CHILDLIFE” and “CHILDLIFE ESSENTIAL”.
3. In 1997, the 2nd Plaintiff founded the 1st Plaintiff with the objective of marketing the supplements formulated by him in the United States and around the world. The 1st Plaintiff, trading as “CHILDLIFE ESSENTIALS”, is and has at all material times been in the business of overseeing the production and distribution of the nutritional and dietary supplement products specially formulated by the 2nd Plaintiff for infants and children (“the ChildLife Products”).
4. The ChildLife Products have been marketed and promoted extensively throughout the world over the years, including through social media websites on the internet. In terms of sales turnover, the 1st Plaintiff has achieved hundreds of millions of US dollars of sales of the ChildLife Products from 2018 to 2020 globally. In Hong Kong, the 1st Plaintiff’s sales of the ChildLife Products in 2018 and 2019 were at least US$2.4 million and US$1.5 million respectively. According to the Plaintiffs, after two decades of specializing in formulating nutritional and dietary supplements for infants and children, the Plaintiffs have become one of the global leaders in children health products. The ChildLife Products have also received numerous awards over the years.
5. The ChildLife Products were and have been marketed under and by reference to the marks “CHILDLIFE”, “童年時光” (“the Chinese Mark”) (in Chinese speaking markets) and a heart device “ ” (“the Heart Device”, and collectively “the ChildLife Marks”).
6. The ChildLife Marks have been registered around the world in relation to Class 5 products. The earliest “CHILDLIFE” trade mark was registered in the United States on 30 January 1996.
7. According to the Plaintiffs, the Heart Device was originally drawn and created in 1996 by one Mr Koji Takei, an American creative artist, on commission basis by the 2nd Plaintiff. The 2nd Plaintiff is and was at all material times the owner of the copyright subsisting in the Heart Device.
(ii) The Defendants and their relationship with the Plaintiffs
8. The Plaintiffs’ case on the claims against the Defendants can be summarised as follows.
9. One Mr Lu Qidong (“Lu”) first approached the Plaintiffs in August 2009 in his then capacity as the marketing manager of a company named “High Hope International Group” (“High Hope”). He expressed interest in marketing some of the ChildLife Products in the Mainland, and explored the possibility of co-operation with the 1st Plaintiff. By that time, the ChildLife Products had already been widely available and the Plaintiffs had also secured trade mark registrations for the mark “CHILDLIFE” in different jurisdictions around the world, including the International Registration No 880154 for the mark “CHILDLIFE” in Class 5, registered as of 6 February 2006 and designating, inter alia, the Mainland.
10. In or about early December 2009, GDS Group, Inc. (“GDS Group”), the then official distributor of the ChildLife Products worldwide, invited Lu to submit a marketing plan for the ChildLife Products and the purchase target for the first year for GDS Group’s consideration. A meeting was eventually held on 2 February 2010 for Lu and his colleagues from Asambly Chemicals Co., Ltd (“Asambly”), a subsidiary of High Hope responsible for this project, to make a presentation to GDS Group (“the 2010 Presentation”).
11. The Heart Device, as used alongside and in conjunction with the mark “CHILDLIFE” and the slogan “Leaders in Nutritional Supplements for Kids!” on the ChildLife Products packaging and marketing materials, had already been reproduced by Lu on 2 pages of the 2010 Presentation. According to the Plaintiffs, this unequivocally shows that Lu was clearly aware that Plaintiffs had already been using the Heart Device at the time.
12. Eventually, an exclusive distributorship agreement was signed between GDS Group and Asambly on 1 April 2010. A Mainland corporate entity, Nanjing TNSG Biotech Co., Limited (“TNSG”), was appointed as a sub-distributor of Asambly some time in 2010, though the Plaintiffs were only subsequently informed of the said appointment in May 2011.
13. TNSG, a company run and controlled by Lu with his wife Madam Guo Zhijuan (“Madam Guo”), was incorporated on 26 March 2010, just 6 days before the exclusive distributorship agreement was signed. On 20 April 2010, i.e. within a month after TNSG’s incorporation and about 2 weeks after the signing of the exclusive distributorship agreement between GDS Group and Asambly, TNSG applied to register both the English mark “CHILDLIFE” and the Chinese Mark “童年時光” in the Mainland. According to the Plaintiffs, this is clear evidence showing that TNSG had been incorporated in anticipation of and with a view to its being used in the marketing and distribution of the ChildLife Products. Further, the trade mark applications had also been filed in anticipation of TNSG’s marketing of the ChildLife Products in the Mainland, and that the intention was for the Chinese Mark to be used as the Chinese equivalent of the English mark “CHILDLIFE”. The Defendants have not provided any other explanation regarding the simultaneous applications to register the Plaintiffs’ mark “CHILDLIFE” (which they have acknowledged belongs to the Plaintiffs) and the Chinese Mark.
14. The distributorship agreement between GDS Group and Asambly was subsequently terminated in or about 2012 after Lu had tried very hard to convince, and did eventually succeeded in persuading, GDS Group to do so. In an earlier email dated 28 August 2011, Lu had informed GDS Group that he was leaving Asambly to work for TNSG.
15. Upon the termination of the distributorship relationship with Asambly, TNSG immediately took over the distribution of the ChildLife Products in the Mainland. The Plaintiffs are now unable to locate a copy of the 2012 distributorship agreement signed between GDS Group and TNSG at the time. The subsequent agreements signed in 2013 (“the 2013 Distributorship Agreement”) and 2018 (“the 2018 Distributorship Agreements”) have been produced in evidence.
16. The 2018 Distributorship Agreements define the Plaintiffs’ “Intellectual Property” as including, inter alia, all “CHILDLIFE” trademarks, trade names, designs and copyrights used in connection with the advertising, promotion, sale and/or distribution of the ChildLife Products in English and any translations thereof or other versions of the same in languages other than English.
17. It is the Plaintiffs’ case that, throughout the years, the Chinese Mark has consistently been used as the Chinese version of the brand “CHILDLIFE”. Even in TNSG’s own website[1], TNSG had unequivocally acknowledged that the Chinese Mark was a brand created by the 2nd Plaintiff, and that the Chinese Mark is equivalent to “CHILDLIFE” and is the Chinese version of the brand “CHILDLIFE”. The awards obtained by and the history of the ChildLife Products had been referred to in the 1st Defendant’s flagship store on Tmall.hk.
18. Under Section V(c) of the 2018 Distributorship Agreements, TNSG was permitted to display and use the Plaintiffs’ “Intellectual Property” solely in connection with the advertising, promotion, sale and distribution of the ChildLife Products. Further, TNSG and its affiliates were prohibited from registering or filing for registration of any mark or slogan of the ChildLife Products within any class or category without prior written approval from the Plaintiffs.
19. Upon the request of TNSG, the Plaintiffs had previously authorised the 1st Defendant (TNSG’s subsidiary) to operate a flagship store for the ChildLife Products on the e-commerce platform Tmall.hk. A flagship store is a store which is specifically authorised by a brand owner to exclusively market the products of the brand. Both Tmall.hk and JD.hk only allow a single flagship store for one brand on their e-commerce forums.
20. The period of authorisation was from 1 January 2018 to 31 December 2022, which is exactly the term stipulated under the 2018 Distributorship Agreements.
21. Pursuant to the said authorisation, the 1st Defendant set up and operated a flagship store for the ChildLife products on Tmall.hk (“the Tmall Store”). Apart from operating the Tmall Store, the 1st Defendant also set up and operated a flagship store for the ChildLife Products on JD.hk (“the JD Store”), but the Plaintiffs have not been able to locate any authorization letter issued to the 1st Defendant authorising it to operate this flagship store. I would refer both flagship stores collectively as “the Flagship Stores”).
(iii) Termination of the distributorship relationship and the subsequent conducts of the Defendants
22. The 2018 Distributorship Agreements were terminated by the Plaintiff in March 2021. The Plaintiffs alleged that there were various serious breaches by TNSG under the said agreements. One of the allegations was that, without the prior written approval of the Plaintiffs, TNSG and its affiliates had extensively registered or filed to register a number of marks of the ChildLife Products[2], including “CHILDLIFE” (made on 20 April 2010), the Heart Device (made on 7 November 2019), “童年時光”, i.e. the Chinese Mark (about 40 applications made on 29 March 2018, 3 January, 4 February, 9 August and 7 November 2019, and 25 November 2020) and “FIRST DEFENCE” (made on 16 March 2020).
23. Though the Defendants have contended in affirmation that there was no basis for the Plaintiffs to terminate the 2018 Distributorship Agreements, Mr Wong, SC, counsel for the Defendants, does not pursue such argument in his submissions. In any event, the Defendants have not put forward any argument or evidence to substantiate such allegation. Neither have they or TNSG done anything in the past 6 months to dispute the said termination (including instituting arbitration proceedings pursuant to the arbitration clause in the 2018 Distributorship Agreements).
24. Indeed, whether the 2018 Distributorship Agreements had been validly terminated is a non-issue for the purpose of the present application. Even if such agreements were still subsisting and continue to be binding, TNSG and its affiliates would then be bound by Section V(c) of the agreements not to use the “Intellectual Property” in relation to non-ChildLife Products. Hence, if the Plaintiffs are the owners of the ChildLife Marks and the goodwill associated with such marks, TNSG and the Defendants are prohibited from using any of the ChildLife Marks to promote or market non-ChildLife Products irrespective of whether or not the 2018 Distributorship Agreements have been terminated.
25. After the termination of the 2018 Distributorship Agreements, it is common ground that the 1st Defendant continued to operate the Flagship Stores on Tmall.hk and JD.hk, which sold similar children nutritional and dietary supplement products under the brand name “INNE”. According to the information provided therein, the “Inne” products (“the Inne Products”) they are now marketing is an upgraded new version of the ChildLife Products, in particular, by the use of descriptions such as “煥新升級”. The Chinese Mark and the Device Mark also appear in the webpage of the Flagship Stores. The Defendants’ Inne Products were shown in the promotional materials to display the Device Mark.
26. It cannot be seriously disputed that customers seeing the promotional materials in the Flagship Stores will be led to believe that the Inne Products are the upgraded version of the Plaintiffs’ ChildLife Products. In fact, the Defendants have placed representations of the Plaintiffs’ ChildLife Products bearing the mark “CHILDLIFE” alongside representations of the Defendants’ Inne Products to back up their misrepresentation. Further, the customer service of the Tmall Store has indicated to consumers that the Inne Products are of the same brand as the ChildLife Products, and the former are the upgraded version of the latter. The 1st Plaintiff has also received an email from a customer in the Mainland, who was clearly confused and had been deceived into believing that the Inne Products came from the Plaintiffs.
27. It is also not disputed that TNSG has recently released articles in the media relating to its allegedly “new and upgraded” “童年時光” products. In the said articles, TNSG claimed that the new “Inne” series was an upgrade from the previous “童年時光” products (which obviously referred to the ChildLife Products). TNSG further claimed that “童年時光” has been the number one infant nutrition brand in the Mainland. Since the only infant nutrition products which had been marketed and sold in the Mainland under and by reference to the name and mark “童年時光” were the ChildLife Products, members of the trade and public would have been misled into believing that the “Inne” Products are upgraded ChildLife Products.
28. When comparing the Defendants’ Tmall Store in early July 2021 with what can presently been seen thereon, it is not difficult to see that the Defendants are replacing the ChildLife Products with the Inne Products. However, importantly, when marketing the Inne Products, the Defendants are still relying on the previous sales figures of the ChildLife Products in support. The layout of the pages is also confusingly similar save and except the replacement of the products in the photos, and the products themselves are also similar in appearance and bear the Heart Device as well as the Plaintiffs’ “Nutrition for Kids” trade mark.
29. It is also common ground that, since a date unknown to the Plaintiffs, the 1st Defendant has transferred the operation of the JD Store to the 2nd Defendant. Both Defendants are related companies controlled by Madam Guo.
30. The Plaintiffs now seek interlocutory injunctive relief to stop the Defendants from, inter alia, operating the Flagship Stores and from marketing non-ChildLife Products under and by reference to the ChildLife Marks, pending the trial of this Action. It is the Plaintiffs’ case that by reason of the wrongful acts of the Defendants, there has been and continues to be considerable confusion amongst members of the trade and the public. Members of the trade and the public have in fact been deceived into thinking that the non-ChildLife products such as the Inne Products marketed by the Defendants are the same as or are upgraded version of the Plaintiffs’ ChildLife Products.
LEGAL PRINCIPLES FOR THE GRANTING OF INTERLOCUTORY INJUNCTION
31. The principles governing the grant of interlocutory injunctions are well-established. As set out in the landmark decision of American Cyanamid Co v Ethicon[3], the plaintiff must show:
(i) there is a serious question to be tried in respect of the claim;
(ii) the plaintiff will suffer irreparable damage if no injunction is granted;
(iii) the defendant will not suffer irreparable damage if the injunction sought is granted; and
(iv) if (ii) and (iii) are not conclusive, on a proper consideration of the balance of convenience or balance of justice, an injunction shall be granted.
32. If the court considers that the balance of convenience is evenly balanced, the court can take into account in tipping the balance the relative strength of each party’s case as revealed by the affidavit evidence adduced.
33. In the case of interlocutory mandatory injunctions, the principles governing the grant were summarized by DHCJ Lisa Wong SC (as she then was) in Wu Wei v Liu Yi Ping:[4]
(i) The difference between the grant of a mandatory interlocutory injunction and a negative interlocutory injunction is not one of principle.
(ii) The ultimate question is: what is the course to adopt which involves the least injustice in case the grant or refusal of interlocutory relief, as the case may be, turns out to be wrong.
(iii) The balance of convenience test is in reality a balance of the risk of doing an injustice.
(iv) The more “assured” the court is on the merits of the applicant’s case, the less will be the risk of injustice.
(v) However, if the circumstances are that justice requires the grant of the mandatory injunction at an interlocutory stage, then such an injunction should be granted irrespective of whether the court has a “high degree of assurance” as to the merits of the applicant’s case.
(vi) Nor does the court lose sight of the practical realities of the situation to which the injunction will apply.
(vii) Much depends on what mandatory injunction is sought. Where the injunction sought is not expensive to comply with, or is not irreversible or would not effectively pre-empt the trial, the court may well grant the injunction without requiring a high degree of assurance even if the injunction is mandatory in effect.
34. In cases where the defendant is not able to demonstrate an arguable defence to the plaintiff’s claim, there is no need to consider the adequacy of damages or the balance of convenience in accordance with the principles laid down in American Cynamid and the court should grant the injunction sought.[5]
35. Damages will usually not be an adequate remedy to the plaintiff in cases in which one of the allegations is the likelihood of confusion in the trade.[6]
36. In considering the balance of convenience or the balance of justice, the court is entitled to take into account the following factors:
(i) Whether the plaintiff has demonstrated a strong case on the merits[7];
(ii) Whether the defendant had chosen to walk into the existing situation with its eyes open or through a lack of prudence[8].
THE DEFENDANTS’ GROUNDS OF OPPOSITION
37. It is the Defendants’ contention that there is no serious issue to be tried in respect of the Plaintiffs’ claims. Whilst they acknowledge that the Plaintiffs are the owner of the English Mark and the associated goodwill thereof, the Defendants claim that their affiliated company TNSG is the owner of the Chinese Mark and the Heart Device and their associated goodwill in the Mainland. That is why the Defendants say that they are entitled to market the Inne Products in their Flagship Stores by reference to the Chinese Mark and the Heart Device.
38. Apart from no serious issue to be tried, the Defendants are also relying on the following grounds to oppose the Plaintiffs’ O 29 application:
(i) The Plaintiffs have failed to show irreparable harm if no interim or interlocutory injunction is granted.
(ii) The Defendants will suffer irreparable harm if an interim or interlocutory injunction is granted.
(iii) The Plaintiffs have not shown that they are able, or have assets within the jurisdiction, to honour their undertaking as to damages in the event that the interim or interlocutory injunction is wrongly granted.
(iv) There is inordinate and unexplained delay in making this application.
(v) If the court deems it necessary, the Summons should be adjourned pending the decisions of the China National Intellectual Property Administration (“CNIPA”)[9] and the disposal of the Defendants’ application for a stay of proceedings on forum non conveniens grounds (“the Forum Application”).[10] In the meantime, no interim relief ought to be granted.
39. I will deal with each of the objections in turn. But before I do so, I will address the question as to whether the court has jurisdiction to grant the injunction as sought by the Plaintiffs which would have certain extra-territorial effect.
POWER OF THE HONG KONG COURT TO GRANT INTERLOCUTORY INJUNCTION WITH EXTRA-TERRITORIAL EFFECT IN RESPECT OF INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
40. It is common ground the Defendants’ Flagship Stores do not ship the Inne Products to a Hong Kong address. The target customers of the Flagship Stores are all in the Mainland, and the products are also shipped from the Mainland. In trying to stop the Defendants from selling their products by reference to the Chinese Mark and the Device Mark by way of injunction, the Plaintiffs are actually trying to stop the Defendants’ alleged passing-off or copyright infringement activities in the Mainland. In the hearing, I have raised the issue as to whether the Hong Kong court has jurisdiction to grant the interlocutory injunction with such extra-territorial effect.
41. In answering my queries, Mr Yan, SC, counsel for the Plaintiffs, has referred me to the following passages in The Law of Passing-Off, Unfair Competition by Misrepresentation by Wadlow:[11]
“A claim brought in England in respect of acts of passing off or unfair competition taking place overseas is likely to involve at least the following issues: personal jurisdiction over the proposed defendant(s), including the grounds under which the claim form may be served out of the jurisdiction if necessary, and whether with or without leave; subject matter jurisdiction or the justiciability of the claim, and the possibilities of arguments of forum non conveniens; identification of the applicable law for the claim; ascertainment by expert evidence of the requirements of that law; and evidence of liability or not in fact.
… … …
In contrast to other fields of intellectual property, actions in respect of acts of passing off or injurious falsehood committed abroad are by no means a novelty. … … …
If the case can be framed as one of export of instruments of deception, then an extra-territorial claim on that basis is attractively simple – especially if many different foreign markets are involved, or the relevant local law is difficult of proof or is ineffective.
More recently, it came to be recognised that conduct in a foreign country which would have been actionable as passing-off had it occurred in England could be restrained by the English courts, and damages awarded, if the latter had personal jurisdiction over the defendant, quite irrespective of whether instruments of deception are involved or whether it could be said that a tort had been committed under English law. This formerly arose from application of the rule in Phillips v Eyre, but the same result may now be achieved under the Private International Law (Miscellaneous Provisions) Act 1995.
… … …
In Alfred Dunhill v Sunoptic, the Court of Appeal went one step further by granting an interlocutory injunction against passing off sunglasses and spectacle frames in Switzerland as well as Britain. That was not an instruments of deception case, as the defendants’ sunglasses and frames were manufactured by a contractor in Italy and had no connection with the UK. The plaintiffs had asked for a worldwide injunction but Switzerland (where the defendant company was incorporated) was the only country for which they had adduced satisfactory evidence of local law. The court rejected the argument that the plaintiffs could rely on the presumption that foreign law corresponds to English. If the plaintiffs wanted more extensive injunctions, they could come back to the court with evidence of reputation, confusion and consequent legal liability in those countries. In James Burrough v Speymalt, the pursuers were able to maintain an action for alleged passing off in Italy, although claims for registered trade mark infringement were struck out as not being justiciable in Scotland.
… … …
The foregoing cases in which the respective plaintiffs failed, in addition to Alfred Dunhill v Sunoptic in so far as it concerned foreign countries other than Switzerland, should be taken solely as illustrating the importance of giving evidence of the relevant foreign law if an injunction is to be awarded in respect of conduct abroad.
… … …
As a practical matter, the only relevant bases of jurisdiction at common law are or were that if the High Court had personal jurisdiction over the defendant (typically by virtue of the latter being a UK-incorporated company with its registered office in England and Wales, and/or by carrying on business in the jurisdiction) then the latter could in principle be sued for acts of passing off, etc. committed anywhere in the World. Also, if a foreign defendant had committed or was otherwise liable for acts of passing-off or injurious falsehood within the jurisdiction, then service on him would be permitted outside the jurisdiction under the former RSC Ord. 11 r.1(1)(h) – tort committed within the jurisdiction. In the former respect, there was and is a recognised and well-established distinction between passing-off and the proprietary intellectual property torts, such as patent, copyright and even trade mark infringement,
Unlike the latter, neither the former ‘double actionability’ rule of Phillips v Eyre, nor the rule in the Mocambique case, ever prevented a foreign cause of action being entertained. The leading cases deciding against the common law justiciability in the UK of infringements of foreign proprietary intellectual rights expressly distinguished, and approved, the separate treatment of passing-off.”
42. In the United Kingdom, the double actionability rule has been abolished by the Private International Law (Miscellaneous Provisions) Act 1995. The rule still exists in Hong Kong law and so the common law principles as cited in the said passages are applicable here.
43. The following principles can be summarised from these passages:
(i) In so far as a claim for infringement of intellectual property rights outside jurisdiction is concerned, the law is treating passing-off (and injurious falsehood) differently from other types of intellectual property rights such as patents and registered trade marks (where separate registration of the claimant’s right in that jurisdiction is required).
(ii) To sue the defendant from committing passing-off outside jurisdiction, the court must have personal jurisdiction over the defendant (usually by showing that the defendant is a Hong Kong resident or a company incorporated in Hong Kong).
(iii) The claimant can formulate the claim in either or both of the following manners:
(a) the defendant is trying to export an instrument of deception (the most usual case being using a Hong Kong “shadow” company with the name incorporating the claimant’s trade mark to carry on business outside Hong Kong including granting licences to others to use the relevant trade mark) with a view to deceive the public and consumers outside Hong Kong;
(b) the defendant’s passing-off activities are also actionable in the foreign jurisdiction concerned.
(iv) In the case of (b) above, the claimant would have to produce evidence of the relevant foreign law to prove that the defendant’s passing-off activities are also actionable under the law of that jurisdiction.
44. Being the judge in charge of the Intellectual Property List, I have come across many attempts made by practitioners, in particular in default judgment applications, to ask the court to grant injunction to stop passing-off activities outside jurisdiction. The aforesaid passages would provide a useful guideline for them to prepare similar applications in the future.
45. Mr Wong does not seek to dispute these legal principles.
46. In the present context, the Hong Kong court has personal jurisdiction over both Defendants as they are companies incorporated in Hong Kong. Provided that the Plaintiffs can show that the Defendants’ passing-off activities in the Mainland are actionable under Mainland law, the Hong Kong court has jurisdiction to grant an injunction to prohibit the Defendants from continuing such activities in the Mainland.
47. Both sides have adduced contrary expert evidence on such subject. I will deal with such issue in the latter part of this Reasons for Decision.[12]
SERIOUS ISSUES TO BE TRIED
(i) The ownership of the Chinese Mark and the Heart Device and their associated goodwill in the Mainland
48. Having addressed the issue of the extra-territorial effect of the injunction, I then turn to the different objections raised by the Defendants, starting with the allegation that there is no serious issue to be tried in respect of the Plaintiffs’ claims.
49. As a matter of law, in order for the Defendants to succeed in arguing that there is no serious issue to be tried, it would be necessary for them to demonstrate that the claim should be struck out. The threshold for the Defendants to succeed is therefore a high one.[13]
50. As mentioned above, it is the Defendants’ case that their affiliated company TNSG is the owner of the Chinese Mark, the Heart Device and their associated goodwill in the Mainland. Hence, after the termination of the 2018 Distributorship Agreements on 23 March 2021, they have the right to use the Chinese Mark and the Heart Device in the Mainland. Further, the Defendants deny that they had represented themselves as the authorised distributors of the Plaintiffs after the termination of the said agreements. However, the report of the investigator engaged by the Plaintiffs show that the Defendants did make such representation on at least one occasion.
51. In trying to establish that TNSG is the owner of the Chinese Mark and the Heart Device and their associated goodwill in the Mainland, the Defendants are relying on the following points:
(i) There is no suggestion by the Plaintiffs that they devised the Chinese Mark, which is part of the name of “TNSG Biotech Company Limited (南京童年時光生物技術有限公司)”, i.e. TNSG. The Chinese Mark (童年時光) is not a literal translation of “CHILDLIFE”.
(ii) There is also no suggestion that the Plaintiffs have at any time used the Heart Device or the Chinese Mark themselves in the Mainland or Hong Kong. They have no registrations of such marks in the Mainland or Hong Kong.
(iii) The Chinese Mark had existed and had been used by TNSG before the marketing of the ChildLife Products by TNSG.
(iv) In the Mainland, TNSG is currently the registered owner of the Chinese Mark and the Heart Device. As early as 20 April 2010, TNSG applied for the registration of the Chinese Mark. That was before TNSG was even appointed as a sub-distributor of the Plaintiffs’ ChildLife Products on 15 August 2011.[14] It also applied for the registration of the Heart Device on 4 January 2012.
(v) Prior to the termination of the distributorship relationship, it was TNSG which promoted and marketed the ChildLife Products in the Mainland. The ChildLife Products were promoted and sold under the Chinese Mark and the Heart Device but without reference to the English Mark. Further, the sale was conducted by TNSG without any reference to it being the authorised agent of the Plaintiffs. Under such circumstances, the Defendants are the owners of the Chinese Mark and the Heart Device and their associated goodwill in the Mainland.
(vi) The Defendants also claim that the the Plaintiffs were aware of TNSG’s registrations of the Chinese Mark and the Heart Device since at least 5 May 2017 (if not earlier given that the registrations were and are matters of public record), when the 2nd Plaintiff (the founder and president of the 1st Plaintiff) made a statement in support of an infringement action launched in the Mainland by TNSG (“the 2017 Statement”). Rather than complaining about the registrations as being malicious or dishonest, or taking steps to revoke them, or to claim ownership thereof, the 2nd Plaintiff supported TNSG as the legal and rightful owner of those marks and the goodwill in the 2017 Statement.
(vii) Hence, the scope of “Intellectual Property” referred to in the 2018 Distributorship Agreements said to be owned by the Plaintiffs must be understood to exclude the Chinese Mark and Heart Device and their associated goodwill, which the 2017 Statement acknowledges to be owned by TNSG. It was never alleged that TNSG held the registrations of those marks, which the Plaintiffs were aware of when the 2018 Distributorship Agreements were made, as the agent on behalf of the Plaintiffs.
52. In my judgment, there is little merit in these contentions. In fact, some of these contentions are contrary to the overwhelming and undisputed evidence about the promotion and the marketing of the ChildLife Products prior to the termination of the relationship between the parties.
53. First, it is clear that TNSG has marketed the ChildLife Products using the Chinese Mark (童年時光) as the Chinese version of “CHILDLIFE”. The evidence is simply overwhelming:
(i) In TNSG’s own website[15], TNSG has unequivocally acknowledged that the 2nd Plaintiff was the founder of “童年時光”, that “童年時光” was established in the United States in 2000 and that “童年時光” has had a history of 21 years (as at 2021). Further, TNSG has identified various ChildLife Products as being “童年時光” products. In the circumstances, TNSG has itself acknowledged and represented to the public that “童年時光” is equivalent to “CHILDLIFE” and is the Chinese version of the brand “CHILDLIFE”.
(ii) Upon the request of TNSG, the Plaintiffs issued a statement (which was drafted by Lu) on 28 September 2012 to warn the general public of potential fake ChildLife Products in the market. In the Chinese part of the statement, the Chinese Mark was clearly used as the Chinese version of the “CHILDLIFE” brand as it referred to “CHILDLIFE/童年時光產品”.
(iii) In the 2017 Statement made by the 2nd Plaintiff on 5 May 2017 which was drafted by Lu, it was stated that: “The original label contains the trademark “Childlife”. And all Childlife-branded products sold within [the Mainland] should bear the mark in Chinese language together with the logo of “red heart”.” The “mark” obviously referred to “the trademark ‘Childlife’” and the only mark in Chinese language which has ever appeared on the ChildLife Products was “童年時光”.
(iv) In the Defendants’ Flagship Stores, there were pages which specifically state and acknowledge that: (a) “童年時光” is a brand from the United States; (b) the 2nd Plaintiff was the brand creator of “童年時光”; (c) “童年時光” was created in 1998; and (d) “童年時光” had achieved numerous awards over the years globally. All the awards referred to therein were actually awarded to the ChildLife Products. Further, in the Tmall Store, the brand of the ChildLife Products is stated to be “ChildLife/童年時光”, which clearly represents and acknowledges that “CHILDLIFE” and the Chinese Mark both refer to the same brand.
(v) There are photos and advertisements to show that, in Hong Kong, the ChildLife Products have been marketed under the English Mark, the Chinese Mark and the Heart Device. The Chinese Mark was used as the Chinese equivalent of “CHILDLIFE”.
(vi) There is ample evidence (including the references in “Baidu 百科” and documents from e-commerce retailers) to show that, throughout the years, the Chinese Mark has consistently been used as the Chinese version of the brand “CHILDLIFE” by members of the trade and the public.
54. In the affirmations filed by the Defendants, they have completely failed to address the evidence mentioned above.
55. Mr Guo Guilin, the father of Madam Guo (“Guo”), in his 2nd Affirmation tried to contend that the Flagship Stores are “童年時光” flagship stores and not “CHILDLIFE” flagship stores. Such contention is completely unmeritorious.
56. First, as mentioned above, “童年時光” and “CHILDLIFE” refer to the same brand. The Chinese Mark is simply the Chinese version of the English mark “CHILDLIFE”. Over the past decade, the public and the trade has been educated as such, and TNSG and the Defendants have themselves acknowledged and represented this to be the case. Further, there is no evidence whatsoever that there were other “童年時光” products available in the market which were not the ChildLife Products of the Plaintiffs, except those products which the Plaintiffs have recently discovered to be available at the Defendants’ Flagship Stores and about which the Plaintiffs are now complaining. Accordingly, the Defendants’ attempt to draw the purported distinction between a “童年時光” flagship store and a “CHILDLIFE” flagship store is totally without substance and wholly disingenuous.
57. Second, it is misleading for Guo to make such contention. An investigation using the “Wayback Machine” (a digital archive of the world wide web) has revealed that the Defendants’ JD Store was originally called the “童年時光CHILDLIFE 海外旗艦店”, as can be gleaned from the record archived on 15 June 2019. The banner setting out this name of the JD Store is also further proof that the Chinese Mark “童年時光” is the Chinese version of the English mark “CHILDLIFE”. Some time between 15 June and 30 July 2019, the Defendants, without the authority and knowledge of the Plaintiffs, changed the name and removed the reference to “CHILDLIFE” from the shop name. The timing actually coincides with the date (about 3 July 2019) when the Defendants allegedly first started selling a non-ChildLife Product on the Flagship Stores. Though the Plaintiffs could not obtain similar records about the Tmall Store, there is reason for the court to believe that the Tmall Store, like the JD Store, also had “CHILDLIFE” in its name in the past.
58. Third, the Tmall Store was initially opened with the authority of the Plaintiffs. There were two such authorisation letters issued upon the request of Lu[16], and the Tmall Store was probably set up pursuant to these authorisations. The Defendants have provided no evidence of them having set up another “CHILDLIFE” flagship store on Tmall.hk other than the subject one. If Guo’s claim that the “童年時光” flagship store is not the “ChildLife” flagship store (which TNSG had been authorised to set up with these authorisations) were true, there would have been no point for TNSG to have asked the Plaintiffs for the said authorisations.
59. In applying to set up a flagship store on Tmall.hk or JD.hk, the Defendants must have been required to submit the relevant authorisation letter from the brand owner. Without producing authorisations from other brand owner, the Defendants must have submitted the authorisations given by the Plaintiffs as part of the documents submitted in setting up the Flagship Stores.
60. The contention that the Chinese Mark had existed and had been used by TNSG before the marketing of the ChildLife Products by TNSG is equally without substance and contrary to the overwhelming evidence.
61. If the Defendants’ contention were true, it would only have seen sensible for the Defendants to disclose the background leading to the setting up of TNSG. By deliberately omitting to provide such information, there is no reason for the court to doubt the Plaintiffs’ evidence that TNSG was incorporated and the Chinese Mark was applied for in anticipation of the marketing of the ChildLife Products. In fact, the timing and the sequence of events very much support the Plaintiffs’ case. It is also hard for the Defendants to explain why on the very same day that TNSG applied to register the Chinese Mark, it also applied to register the English mark “CHILDLIFE” (though in respect of other goods which were chocolate drinks and candy, etc), which the Defendants acknowledge is rightly owned by the Plaintiffs.
62. For the Defendants’ claim that TNSG had marketed other nutritional products for children under the Chinese Mark in 2011, the evidence produced by the Defendants, including an invoice and two photographs, is far from adequate in supporting the Defendants’ claim. They do not show the use of the Chinese Mark (in fact they show the use of other marks) on the products and the quantity involved is both minimal and questionable. When the 2nd Plaintiff asked Lu to produce details of the other products on which TNSG claimed to have used the Chinese Mark and when such use had occurred, Lu was unable to provide any more details. If there were indeed such use, it would be very difficult to explain why the Defendants could not have produced better evidence to support this important aspect of their case. Further, if the Chinese Mark and the Heart Device were the Defendants’ own brand, the Defendants cannot offer any satisfactory explanation as to why they referred to the Plaintiffs’ history and the achievements of the ChildLife Products in marketing their “own” brand using the Chinese Mark and the Device Mark. Under such circumstances, there is weight in Mr Yan’s submission that the Defendants’ claim in this regard is blatantly false.
63. In any event, even if TNSG had used the Chinese Mark on one product in 2011, by subsequently using and promoting the Chinese Mark as the Chinese version of the brand “CHILDLIFE”, and by agreeing that such Chinese version forms part of the “Intellectual Property” of the Plaintiffs under the 2013 Distributorship Agreement and the 2018 Distributorship Agreements, TNSG has clearly acknowledged that the Chinese Mark should belong to the Plaintiffs.
64. Irrespective of the ownership of the Chinese Mark, it is very difficult for the Defendants to defend their position on the ownership of the Heart Device. It is clear that the 2nd Plaintiff is the owner of the copyright of the Heart Device. As the Plaintiffs have all along marketed the ChildLife Products by reference to the Heart Device, it is difficult to explain why the Plaintiffs would have given up their rights in respect of such device so lightly in the Mainland.
65. There is also abundant evidence to show the use of the Heart Device by the Plaintiffs in the Mainland and Hong Kong prior to 2011:
(i) In the Mainland, the Heart Device was prominently displayed at the 6th China International Healthcare Fair held in 2006.
(ii) The Heart Device was also extensively used in the marketing of the ChildLife Products by the Plaintiffs’ previous distributor Green Century Health Product Chain Management (Guangdong) Co., Ltd in 2005.
(iii) In Hong Kong, the Heart Device was also prominently displayed at the 2004, 2005 and 2007 Natural Products Expo Asia held at the Hong Kong Convention & Exhibition Centre.
66. In so far as the Defendants are contending that they are not aware of the Plaintiffs’ use of the Heart Device before 2011, such contention is simply incapable of being believed. In Lu’s 2010 Presentation to the GDS Group, it featured representations of the Heart Device, as used alongside and in conjunction with the “CHILDLIFE” mark on the Plaintiffs’ ChildLife Products packaging and marketing materials as displayed and marketed as described in the preceding paragraph.
(ii) The issue of acquiescence and the significance of the 2017 Statement
67. One of the main contentions relied on by the Defendants in support of TNSG’s ownership of the Chinese Mark, the Heart Device and their associated goodwill in the Mainland is that the Plaintiffs have acknowledged and acquiesced TNSG’s ownership by: (i) agreeing to TNSG’s ownership of the said rights in a negotiation in or around 2013; (ii) not taking any action to challenge TNSG’s registrations of the Chinese Mark and the Heart Device in the Mainland throughout the years; (iii) the 2nd Plaintiff’s signing of the 2017 Statement acknowledging TNSG’s right to take legal proceedings against the infringers of the Chinese Mark and the Heart Device in the Mainland.
68. It is neither possible nor appropriate for the court to resolve factual disputes in an interlocutory application. However, I must say that the Defendants’ factual basis in support of these contentions is rather weak.
69. For the first contention, Guo claimed that “to the best of [his] recollection, [he] did make it clear to Harty during the negotiation process in or around 2013 that TNSG has ownership over ‘童年時光’”.[17] The reference to “Harty” was clearly a reference to Mr Brian Harty (“Harty”) as he is the only person named “Harty” in the 1st Plaintiff. Guo went on to say that Harty must have agreed to, or at the very least acquiesced to the adoption of “童年時光” on the packaging of the ChildLife Products on the basis of TNSG’s said ownership over “童年時光”. However, Harty only joined the 1st Plaintiff in 2017, and so he could not possibly have had the fictitious negotiation with Guo in 2013. In fact, he had never communicated with Guo in his entire life. Further, the Plaintiffs have also checked and confirmed that no one from the Plaintiffs had ever negotiated with Guo on anything relating to the ChildLife Products, as no one even knew that he was involved in the running of TNSG until he made the two affirmations in these proceedings. Apart from bare allegation, there is no satisfactory evidence to show that Guo was somewhat involved in the management of TNSG or the Defendants.
70. For the second contention, there is a factual dispute as to whether the Plaintiffs were aware of the registrations of the Chinese Mark and the Mark Device at an earlier time, say 2017. The Plaintiffs maintain that they only knew about such matter shortly before the Plaintiffs terminated the 2018 Distributorship Agreements in March 2021, whereas the Defendants claim that the Plaintiffs should have known the registrations earlier as the same were and are matters of public record, and that the Plaintiffs should have conducted due diligence investigation about TNSG’s background before its appointment as the Plaintiffs’ distributor in the Mainland.
71. However, the rhetorical question to ask in the present case is whether there are some sensible reasons for the Plaintiffs to have given up their rights in respect of the Chinese Mark and the Mark Device which have been used to market the ChildLife Products in the Mainland.
72. It is a matter of simple commercial sense that the brand owner of a product would jealously guard their interest in respect of the brand names and trade marks of their products. The goodwill associated with these names and marks would be most valuable to a business. That is why the Plaintiffs have applied for international registration of their “CHILDLIFE” mark designating places including the Mainland. If an English name and a local name have been applied to market the same product, there is also no logical reason as to why the brand owner would have lightly allowed another person to own the goodwill associated with the local brand name. This bounds to create confusion as both the English name and the local name would, in the eyes of the local consumers, refer to the same product, and one can easily imagine the problems and complications that may arise if these names are owned by different persons.
73. The argument is even stronger for the Heart Device. It cannot be seriously disputed that the Plaintiffs have all along used the Heart Device to market their ChildLife Products. Unless the Defendants can supply some sensible reasons, which there is none, it is difficult to explain why the Plaintiffs would have allowed or acquiesced TNSG to own the rights associated with the Heart Device in the Mainland.
74. For the 2017 Statement, one has to understand the context under which the 2nd Plaintiff had been asked to sign the document. The 2017 Statement was prepared upon TNSG’s request, drafted by Lu and was for the sole purpose of assisting TNSG to “win a lawsuit” against a third party “smuggler” of the ChildLife Products in the Mainland. There is nothing to suggest that the 2017 Statement was intended to be a declaration of rights by the 2nd Plaintiff as between the Plaintiffs and TNSG.
75. Further, there is nothing in the 2017 Statement which indicates that the 2nd Plaintiff was aware of TNSG’s earlier registrations of the Chinese Mark and the Heart Device. In so far as the statement contained one and only one reference to the “trade mark registration in [the Mainland”, the same plainly refers to the trade mark registration in respect of the “CHILDLIFE” mark[18]. In view of the legal proceedings against the “smuggler”, Lu required the 2nd Plaintiff’s assistance in making the statement to show to the Mainland court that TNSG was authorised to use the ChildLife Marks and hence it could enforce the rights against the infringers.
76. Viewing the 2017 Statement in its proper context, and bearing in mind that by that time the parties had already entered into the 2013 Distributorship Agreement which defines “Intellectual Property” as including the “CHILDLIFE” trade mark, any other version of the same in languages other than English (which necessarily encompass the Chinese Mark), and the Heart Device, Lu and TNSG clearly realized that they had no right to enforce the rights relating to any of these marks against the infringers, and therefore they required the Plaintiffs’ assistance in making the 2017 Statement. They would not have done so if they could simply rely on TNSG’s earlier trade mark rights relating to the Chinese Mark and the Heart Device. Hence, the request for assistance in making the 2017 Statement actually runs against the Defendants’ own case.
77. As mentioned above[19], it is completely nonsensical that the 2nd Plaintiff would have acknowledged TNSG’s alleged trade mark rights in respect of the Chinese Mark and the Heart Device in the 2017 Statement, as contended by the Defendants, if he was indeed aware of the said registrations.
78. In addition, in the latter part of the 2017 Statement, it was specifically stated that TNSG was legitimately authorised by the Plaintiffs to use the “logo of the red heart” and the ChildLife trademarks in plural(which can only mean both the ChildLife mark and the Chinese Mark in the context of the entire statement). The mention of this express authorisation further reinforces the point that the Plaintiffs are the owners of the ChildLife Marks in the Mainland.
79. The court should not make factual findings in interlocutory applications. However, judging from the available evidence before the court at this stage, I can say that the Plaintiffs have a strong case in rebutting the defence of acknowledgement and acquiescence.
80. Indeed, if the Defendants consider that they have a strong defence, I wonder why they do not continue to the use the Chinese Mark to market their new products, as such mark has, according to the Defendants, proven to have a good sales track record. Rather, they are making every effort to mislead the consumers in the Mainland that their new Inne Products are upgraded version of the ChildLife Products, which to me is a clear deception. Taking into account the overall circumstances of the case, I have reasons to believe that the Defendants are making their last effort to boost the sales of their new products by wrongfully riding on the reputation of the Plaintiffs’ ChildLife Marks.
(iii) The issue of double actionability
81. By way of the injunction, the Plaintiffs are seeking to restrain the alleged infringement activities of the Defendants in the Mainland. The Defendants contend that there is no serious issue to be tried because the acts complained of are not actionable in the Mainland.
82. Both sides have filed expert evidence on Mainland law on the issue: Professor Yi for the Plaintiffs and Professor Kong for the Defendants. Professor Yi is a professor of law in Peking University, whereas Professor Kong is the Dean of the law school in Shanghai Jiao Tong University and formerly a judge of the Supreme People’s Court and the President of its Intellectual Property Tribunal.
83. Having carefully considered their evidence, I agree with Mr Yan that the Plaintiffs have demonstrated not only a serious question to be tried but a very strong case on the issue of double actionability.
84. Based on the facts of the Plaintiffs’ case, the unauthorised use of the Chinese Mark and the Heart Device, and the misleading use of the history and achievements of the ChildLife Products, to market and promote the Defendants’ non-ChildLife Products plainly constitute actionable misrepresentation under the tort of passing-off in Hong Kong, if such acts are committed in Hong Kong. It is also wrongful for the Defendants to make any representation to the public that they are still authorised to operate the Flagship Stores for the ChildLife Products or that they are still the authorised distributors of the ChildLife Products, contrary to the truth. According to Professor Yi, such acts are equally actionable in the Mainland under Articles 2, 6 and 8 of the Anti-Unfair Competition Law (“the AUCL”).
85. Likewise, the unauthorised reproduction and use of the Heart Device on TNSG’s or the Defendants’ products and in the webpages of the Defendants’ Flagship Stores, if done in Hong Kong, would constitute copyright infringement under the Copyright Ordinance (Cap 528). According to Professor Yi, such acts are also actionable in the Mainland under the Mainland Copyright Law.
86. In dealing with the extra-territorial effect of the injunction as mentioned above[20], I have not addressed the question as to whether the court has jurisdiction to deal with copyright infringement committed outside Hong Kong. As the Plaintiffs’ passing-off claim in the present case is wide enough to prohibit the Defendants from using the Heart Device, I do not propose to deal with the Plaintiffs’ claim for copyright infringement committed outside Hong Kong.
87. In response to the Plaintiffs’ evidence, the Defendants rely on three main “themes” which run through the opinion of Professor Kong:
(i) the fact that TNSG owns the Chinese Mark and the Heart Device as registered trade marks in the Mainland, giving it the whole right to use, and to authorise others to use, the same;
(ii) the goodwill in those marks being owned by TNSG after years of exclusive use, a fact acknowledged in the 2017 Statement; and
(iii) the fact that TNSG and the Defendants did not and do not act maliciously, dishonestly, or lacking in good faith, in using the Chinese Mark and the Heart Device.
88. Professor Kong’s opinion is therefore based on a very important premise, i.e. TNSG is the rightful owner of the Chinese Mark and the Heart Device and their associated goodwill in the Mainland. As I have demonstrated above, the Plaintiffs have established a strong case that TNSG is not such rightful owner despite the fact that it registered the marks back in 2010 and 2012.
89. Professor Kong also makes an important factual assumption that there would be no confusion amongst the consumers in the Mainland. He says the following in his report:
“For the characteristics of flagship stores and the specific goods purchased, consumers would have a full and clear understanding and therefore would not be confused or misled as to the source of relevant products and services”.[21]
90. As I have demonstrated above, such factual assumption cannot be right. In view of the fact that, in the Mainland: (i) TNSG had along used the Chinese Mark to market the Plaintiffs’ ChildLife Products (which display the English Mark and the Heart Device) and both the English Mark and the Chinese Mark refer to the same product; (ii) TNSG had told the consumers that the ChildLife Products it marketed originated from the United States (by referring to the history of the brand and the awards the products received); and (iii) the Defendants had told the public through the Flagship Stores that their new products were upgraded version of the ChildLife Products, it is quite impossible for the Defendants to argue that there would be no confusion amongst the Mainland consumers caused by such clear misrepresentation or deception.
91. Based on the factual scenario as put forward by the Plaintiffs, this is a simple case that, after the termination of the distributorship arrangement, the distributor continued to use the brand owner’s marks and device to market its new products. The distributor claims that it has the right to do so, relying on the earlier registrations of the mark and device in the Mainland of which the brand owner was not aware until recently. Professor Kong is now suggesting that the brand owner cannot have any redress under the AUCL in such circumstances. Despite his remarkable credentials, I cannot accept his opinion on such issue.
92. The AUFL has been enacted in the Mainland to prevent unfair competition in the market. There is no tort of passing-off in the Mainland, but the ambit of AUFL may cover some of the conducts which are classified as passing-off under the common law.
93. Professor Kong has not expressed any views on Articles 6 and 8 of the AUCL which are contrary to or different from those expressed by Professor Yi. Professor Kong’s views on Article 2, and in particular that the conduct of “[TNSG] does not constitute any act of unfair competition as stipulated in Article 2”, are not supported by any authorities or meaningful analysis. On the contrary, Professor Yi has cited a number of authorities in support of his view as to why Article 2 of the AUCL is applicable to the present case.[22]
94. Professor Kong relies very much on the earlier registrations of the Chinese Mark and the Device Mark by TNSG. However, unlike the old trade marks law in the Mainland, the existing law allows the brand owner to challenge the earlier registration of a mark by some other person on the ground that they are the real owner of such mark. On the basis of the Plaintiffs’ case as pleaded, they can apply to invalidate the registrations of the Chinese Mark and the Heart Device by TNSG.
95. Professor Kong relies on Article 45 of the Mainland Trademark Law and contends that the validity of TNSG’s trade mark registrations have become incontestable after five years. However, Professor Yi provides a detailed analysis, backed up by decided cases, as to why he says the five years’ limitation period would not apply if the previous registration was made maliciously[23], or was acquired by fraud or any other improper means[24], or made in violation of principles of honesty and good faith[25]. Though the facts may be different in those decided cases, they still show that the five years’ limitation period would not be applicable in certain circumstances such as malicious registration cases.
96. Whether TNSG was acting in bad faith or maliciously in obtaining the registrations is certainly a fact-sensitive matter. But as I have demonstrated above, the Plaintiffs have established a good case that the registrations of the Chinese Mark and the Heart Device were made without their prior knowledge or approval. In fact, at the time when TNSG applied to register the Chinese Mark, it also applied to register the English Mark (which the Defendants acknowledge that it is owned by the Plaintiffs) in defiance of the Plaintiffs’ right, though the registration was made in respect of other goods such as chocolate drinks and candy. Further, the it is indisputable that the 2nd Plaintiff is the copyright owner of the Heart Device. It cannot possibly be argued that the Plaintiffs would have given up their rights in respect of such device lightly, which has all along been used for the marketing of the ChildLife Products worldwide. Based on the Plaintiffs’ alleged case, TNSG must have been acting maliciously, dishonestly, or at the very least in bad faith, when it applied to register the Chinese Mark and the Device Mark. As forcefully submitted by Mr Yan, if such kind of conduct was not bad faith, what then is bad faith?
97. For these reasons, the Plaintiffs have established a strong case that the Defendants’ alleged passing-off activities in the Mainland are also actionable under Mainland law.
98. Given the aforesaid analysis, the merit of the Plaintiffs’ claims is so strong that both the factors of irreparable damage and balance of convenience should not deter the court from granting the injunction which is only just and fair in the circumstances. In any event, I am of the view that these two considerations also favour the granting of such interlocutory relief.
IRREPARABLE DAMAGE SUFFERED BY THE PARTIES AND BALANCE OF CONVENIENCE
(i) Alleged irreparable damage suffered by the Plaintiffs
99. The Hong Kong court does not have personal jurisdiction over TNSG, and so the injunction should not have the effect of preventing TNSG from marketing the Inne Products (or indeed the ChildLife Products) in the Mainland. The object of the injunction sought by the Plaintiffs is, therefore, to stop the Defendants from using the Flagship Stores as a platform to continue to sell any products by reference to the ChildLife Marks.
100. As mentioned above, it is indisputable that the customers of the Flagship Stores would be led to believe that the Defendants’ Inne Products are upgraded version of the Plaintiffs’ ChildLife Products. It is also common ground that the Plaintiffs have no control over the quality of the Inne Products. Indeed, whilst the Defendants claim that the Inne Products originated from Germany, the products themselves do not contain any information regarding the manufacturer. The Plaintiffs are also unable to locate any record showing the marketing of the Inne Products in Germany, or indeed in any other parts of the world. There is also question about the certification of the Defendants’ products known as “Inne Healthy Vision”.
101. If there is any problem or complaint in relation to the quality of these products or any bad publicity is generated in respect of such products, this will cause enormous harm to the reputation of the Plaintiffs and the ChildLife Products, particularly since the Defendants have been marketing the Inne Products as upgraded version of the ChildLife Products. I agree with Mr Yan that such damage is plainly irreparable by an award of monetary damages.
102. Further, the Defendants’ marketing of the Inne Products as upgraded version of the ChildLife Products will have serious adverse effects on the business of the Plaintiffs and the sale of the ChildLife Products, as the public will be misled into thinking that the Inne Products are the better and improved version of the ChildLife Products. If this is allowed to occur and continue to occur, the image of the “CHILDLIFE” brand will be significantly tarnished as consumers will be misled to think that the ChildLife Products are inferior to those marketed and sold under the “INNE” brand and its value irreversibly damaged. No one will want to buy the ChildLife Products anymore given there are “better” and “upgraded” version thereof available at comparative prices. This will have considerable effect on the reputation and goodwill built up in relation to the “CHILDLIFE” brand and the ChildLife Products over the years.
(ii) Alleged irreparable damage suffered by the Defendants
103. On the other hand, the Defendants argue that they will suffer irreparable harm if the court were to grant the injunction. It would mean that the Flagship Stores would have to close down completely and the Defendants would be put out of business. At least, it would cause a major disruption to their business resulting in irreparable damage to them.
104. Mr Yan submits that the Flagship Stores should not contain any reference to the ChildLife Marks or the ChildLife Products. Further, the websites should not contain any digital footprint with linkage to them, such that the consumers can be somewhat directed to the webpages of the Flagship Stores by typing in any of the keywords relating to the ChildLife Marks in the internet search engine. In other words, the injunction should not prevent the Defendants from operating the Flagship Stores to sell the Inne Products, provided that no reference is made to the ChildLife Products and the ChildLife Marks and no representation would be made about the Defendants being the authorised agents of the Plaintiffs in respect of any goods.
105. Given these circumstances, the Defendants have certainly exaggerated the damage that they may suffer as a result of the injunction.
106. First, as mentioned above, the injunction would not bind TNSG as the court does not have personal jurisdiction over it. In other words, the court cannot prohibit it from marketing any products in the Mainland.
107. Second, in so far as the Defendants are concerned, the injunction would not prevent them from operating the Flagship Stores and they are able to sell the Inne Products through such platforms. The Defendants do not plan to sell any other products in the Flagship Stores apart from the Inne Products. The injunction would restrain the Defendants from saying in the Flagship Stores that the Inne Products are upgraded version of the ChildLife Products, which the Defendants should not be allowed to do in any event as such representation is a clear misrepresentation aiming to deceive the customers. The injunction may have the effect of preventing the Defendants from using the Chinese Mark and the Heart Device in marketing the Inne Products, but such loss will be relatively easy to quantify and calculate by reference to and compare the sales records before and after the granting of the interlocutory injunction.
108. Thirdly, the injunction will not prohibit the Defendants from selling the Inne Products and other non-ChildLife Products through other channels to their target customers in the Mainland, provided that no misrepresentation is made to the consumers about the origin of the goods.
(iii) Balance of convenience
109. Even if the Defendants will suffer some damage, I am of the view that the balance of convenience still favours the granting of the injunction.
110. I do not need to repeat the enormous irreparable damage (in particular the potential damage to the image of the brand and the products) that may be caused to the Plaintiffs if the Defendants were to be allowed to continue the acts complained of.[26]
111. It is an indisputable fact that, prior to the termination of the 2018 Distributorship Agreements, the English Mark and the Chinese Mark had been used to market the same products, i.e. the ChildLife Products. Now that the Defendants are seeking to sell a new line of products (i.e. the Inne Products) in the Flagship Stores. Yet, given the history of the marketing of the ChildLife Products prior to the termination of the distributorship relationship, customers buying the Inne Products in the Flagship Stores, if they see any reference to the ChildLife Products and the ChildLife Marks, must believe that the Inne Products are related to the ChildLife Products. The potential damage is direct and irreparable.
112. On the other hand, the Inne Products have a relatively short history in the Mainland market (as compared with the ChildLife Products). At least there is no evidence to suggest that the Inne Products were generally available in the market before the same had been promoted for sales in the Flagship Stores. “INNE” is certainly a new brand in the eyes of the consumers. The loss suffered by the Defendants would be the loss of opportunities of promoting the Inne Products by reference to the Chinese Mark and the Device Mark. There would be no possible damage to the brand name or the image of the Inne Products, as opposed to such damage that may be suffered by the Plaintiffs by reference to the brand name of “CHILDLIFE” and the image of the ChildLife Products.
113. Further, there is no serious dispute that the Flagship Stores had all along been used to sell only the Plaintiffs’ ChildLife Products until recently. Under such circumstances, customers of the Flagship Stores would certainly associate the Flagship Stores with the Plaintiffs’ ChildLife Products, in particular a flagship store is supposed to market the products of one brand only.[27] On the other hand, the Inne Products are completely different products, at least that should have been the case in the eyes of the consumers if they have not been misled. Even if the Defendants are prohibited from selling the Inne Products in the Flagship Stores, what harm would that be done to the image of the Inne Products or the Defendants? In my judgment, there would be none, or at least the harm would be limited. After all, Inne Products are different products, and so it is only natural for them to be marketed in platforms other than the Flagship Stores which have all along been used to market the ChildLife Products. Comparing the Defendants’ alleged “harm” with the enormous irreparable damage that may be caused to the image of the “CHILDLIFE” brand and the ChildLife Products, balance of convenience certainly favours the granting of the injunction.
114. Even if the inconvenience to the parties is finely balanced, which I do not accept it to be the case, I am of the view the following additional factors certainly favour the granting of the injunction.
115. First, as demonstrated above, the Plaintiffs have managed to establish a strong case on the merits. Even ignoring the use of the Chinese Mark and the Heart Device in the webpages of the Flagship Stores, what have been stated in these webpages about the Inne Products being the upgraded version of the ChildLife Products are simply false. This is a clear case of deception.
116. As observed by DHCJ Lisa Wong, SC in Wu Wei v Liu Yi Ping[28], the balance of convenience test is in reality a balance of the risk of doing an injustice. The more “assured” the court is on the merits of the applicant’s case, the less will be the risk of injustice.
117. Second, the Defendants clearly embarked upon their wrongful acts with their eyes wide open. They have always known that they do not have the right to operate the Flagship Stores to sell the ChildLife Products upon the termination of the 2018 Distributorship Agreements. They must also be aware that they are not entitled to market the non-ChildLife products by reference to the ChildLife Marks, or by reference to the history and awards of the ChildLife Products. Yet, they proceeded to do so. Accordingly, the Defendants only have themselves to blame if their risky venture backfires.
THE PLAINTIFFS’ FINANCIAL ABILITY TO PAY THE POSSIBLE DAMAGES UNDER THE CROSS-UNDERTAKING AS TO DAMAGES
118. Mr Wong submits that the court should not grant the injunction as the Plaintiffs have not produced any evidence of their ability to pay damages pursuant to the cross-undertaking as to damages.
119. It is true that there is no such evidence. No matter how substantial is the volume of the worldwide sales, the Plaintiffs have failed to show that they have any local assets which can be used to pay the damages. Despite that, taking into account the merits of the Plaintiffs’ claims and the potential irreparable damage caused to the Plaintiffs by the continuous operation of the Flagship Stores in the existing manner, it is only fair and just for the court to grant the injunction. As to the concern about the Plaintiffs’ financial ability, the same can be taken care of by an order for the Plaintiffs to pay an appropriate sum into court to fortify the undertaking.
120. Regarding the quantum of the fortification, there is a lack of direct evidence about the volume of the previous sales of the Plaintiffs’ ChildLife Products through the Flagship Stores. In any event, the past sales figures provide little guidance in assessing the quantum of the fortification. It is not the Defendants’ case that they would continue to sell the ChildLife Products through the Flagship Stores. Instead, they are marketing the new Inne Products with no past tracking records. Furthermore, the Defendants are free to sell the Inne Products in whatever way they want. The only thing they are not allowed to do is they cannot market the Inne Products with reference to the ChildLife Marks or the ChildLife Products. Further, the injunction is targeting the Flagship Stores only. Under such circumstances, the only loss suffered by the Defendants would be limited to the loss of sales of the Inne Products caused by the loss of opportunities of promoting them with reference to the Chinese Mark and the Heart Device. Due to the lack of information in assessing such loss, I am of the view that HK$ 5 million would be an appropriate sum for the fortification. I therefore so ordered.
ALLEGED DELAY IN MAKING THE APPLICATION
121. The Defendants also contend that there is delay in making this application. According to them, the 2018 Distributorship Agreements were terminated on 23 March 2021. The Plaintiffs were aware of the continuous operation of the Flagship Stores since then. However, the Plaintiffs only instructed the investigator to gather evidence on 27 April 2021. No explanation was given as to why the investigator was only able to produce the report on 20 May 2021 and why the Summons was only taken out on 5 July 2021. According to Mr Wong, the delay should have been counted from even earlier time when the Plaintiffs did not object to the Defendants’ use of the Chinese Mark and the Heart Device for the past ten years. In any event, the delay should have run from 2017 when the 2nd Plaintiff signed the 2017 Statement.
122. Despite the able submission of Mr Wong, I cannot accept such argument.
123. First, there is simply no delay in making this application. The notice of termination of the 2018 Distributorship Agreements (which was also in effect a cease and desist letter) was sent to TNSG on 23 March 2021. TNSG’s solicitors only provided a substantive reply on 8 May 2021. In the meantime, there had been email negotiation between Lu and the Plaintiffs between 29 March and 2 April 2021, and instructions were given to conduct investigation against the Flagship Stores on 27 April 2021. The Defendants criticize that it had taken the investigator about 3 weeks to conduct the investigation and prepare the report. However, the investigation involved the ordering and shipping of the samples purchased. In the premises, the time taken by the investigator to prepare the report was certainly not unreasonable, especially taking into account the logistical difficulties occasioned by the current COVID-19 pandemic. In any event, the Plaintiffs cannot possibly be said to be guilty of inordinate delay by reason of this.
124. Following the receipt of the investigation report on 20 May 2021, the Plaintiffs had immediately started preparing the application. Before taking out the Summons, the Plaintiffs had issued cease and desist letters to the 1st and 2nd Defendants on 22 and 29 June 2021 respectively. On 28 June 2021, the Defendants’ solicitors contacted the Plaintiffs’ solicitors and acknowledged receipt of the letter on behalf of the 1st Defendant, and said they were taking instructions and would revert. As no reply was heard from the Defendants’ solicitors, the Plaintiffs took out the Summons on 5 July 2021. Under such circumstances, it is difficult to see how Plaintiffs can be said to be guilty of delay in making the O 29 application.
125. Further, even if there were delay, it is trite law that delay per se is not fatal. The Defendants must show that because of the delay, it will be unreasonable and unjust for the court to grant the relief.[29] In the present case, the Defendants have failed to demonstrate why and how the alleged delay of a few weeks will make the granting of the interlocutory injunction unreasonable and unjust.
126. There is also no substance in the Defendants’ argument that there had been delay in the last ten years for the Plaintiffs to object to the use of the Chinese Mark and the Heart Device. TNSG and its affiliates were operating as the distributor and sub-distributors of the Plaintiffs at the time. Obviously, the Plaintiffs did not object to the use of the Chinese Mark and the Heart Device by TNSG and its affiliates for the marketing of the ChildLife Products.
127. For these reasons, there is simply no merit in the delay argument.
THE DEFENDANTS’ REQUEST FOR THE COURT TO WITHHOLD THE GRANTING OF INTERIM INJUNCTIVE RELIEF AT THIS STAGE
128. Shorting before the hearing of the Summons, the Defendants withdrew their application to stay the proceedings on arbitration ground. Yet the Defendants took out a different application to stay the Hong Kong proceedings on forum non conveniens grounds, i.e. the Forum Application. The parties agree that the Forum Application will have to be dealt with by the court on some future date.
129. In this O 29 application, Mr Wong asks the court to withhold the granting of any interim or interlocutory injunction pending the decision of the CNIPA. There is also a faint suggestion that the court should not grant such relief before the hearing of the Forum Application.[30]
130. I disagree. It is clear that the Hong Kong court has personal jurisdiction over both Defendants. As the Plaintiffs have established a good arguable case that the Defendants have committed passing-off actionable in Hong Kong, and that the Plaintiffs will probably suffer enormous irreparable damage caused by the continuous acts of the Defendants, it is only fair and just for the Hong Kong court to act immediately to stop the alleged wrongful acts. In particular, there is clear misrepresentation to the consumers that the Defendants’ products are upgraded version of the Plaintiffs’ products, and so the Hong Kong court should not allow such deception to continue.
131. The Defendants are switching to market a new line of products. As mentioned above[31], I have reasons to believe that the Defendants are trying to buy time for their scheme of boosting the sales of their new products by leading the former consumers of the ChildLife Products to believe that their new products are somewhat related to the ChildLife Products. To delay the granting of interlocutory injunction under such circumstances would, in my judgment, cause further injustice in the present case.
132. When the Defendants learnt that I would allow the O 29 application near the end of the hearing, they asked the court to grant an interim stay of execution pending the Defendants’ intended application for leave to appeal against my decision. Taking into account the strength of the Plaintiffs’ case and the injustice that may be caused by the delay in the granting of relief as mentioned in the preceding paragraph, I only allowed a short interim stay of execution pending the handing down of the Reasons for the Decision, which, as I indicated to parties, would be available two to three weeks after the hearing. After that, it would be up to the Defendants to take whatever action as they see fit, but at least they would have the reasons of the court by then.
FINAL TERMS OF THE INJUNCTION
133. There are a few observations that I would like to make about the terms of the interlocutory injunction ultimately granted by the court.
134. First, the injunction would only cover the alleged passing-off activities in Hong Kong and the Mainland, as there is no evidence to show that the Defendants had carried on such activities outside these two places. There is also no evidence of foreign law on other places.
135. Second, express provision has been made to clarify that TNSG is not bound by the injunction. The Hong Kong court does not have personal jurisdiction over TNSG which is foreign entity, and hence this court has no jurisdiction to grant an injunction to stop it from carrying on any passing-off activities in the Mainland.
136. Third, the injunction would not prevent the Defendants from running the Flagship Stores to sell products not related to the Plaintiffs. However, any reference to the Plaintiffs’ ChildLife Products and the ChildLife Marks should be removed.
137. Fourth, I grant liberty to the parties to apply. There may be technical matters relating to the operation of the Flagship Stores which may still show the digital linkage to the Plaintiffs’ products and marks, for example by way of search engine, and the Defendants may seek further clarification as to whether their other affiliated companies, if any, are allowed to carry on certain activities in the Mainland. Hence, I insert the provision to cater for these possibilities.
138. There is no serious argument between the parties that the costs of the Summons should be costs in the cause. I therefore so ordered.
139. Before I hand down this Reasons for Decision, I have received a request by the Defendants to vary the terms of the injunction by allowing the Defendants to keep the existing name of the Flagship Stores. According to their letter dated 14 October 2021, by reason of the existing rules and regulations of Tmall.hk and JD.hk, the Defendants cannot change the name of the Flagship Stores which contains the words “童年時光”. Hence, the existing terms of the injunction would have the effect of putting the Flagship Stores out of business. However, the court cannot deal with the request ex parte. If necessary, the Defendants would have to take out an inter parte application for variation of the terms of the injunction.
|
(David Lok)
Judge of the Court of First Instance
High Court |
Mr John Yan, SC, and Mr Philips B F Wong, instructed by Baker & McKenzie, for the Plaintiffs
Mr Stewart Wong, SC, and Ms Sheena Wong, instructed by Jones Day, for the Defendants
[1] www.childlife.cn
[2] copies of the trade marks records showing such registrations and applications can be found in exhibit “BH-73” of the 2nd Affirmation of Brian Conan Harty
[3] [1975] AC 396
[4] HCA 1452/2004, unreported, 30 January 2009, at §§79-81
[5] Yeko Trading Ltd v Chow Sai Cheong Tony & Ors [2000] 2 HKC 612, at 618
[6] Sodastream Limited v Thorn Cascade Limited [1982] RPC 459, at 470-471, Aqua Concepts Limited & Ors v Hong Kong Resort Co., Limited & Anor, HCA 1658/2007, unreported, 31 March 2008, at §31
[7] Series 5 Software Ltd v Clarke [1996] FSR 273, at 286-287
[8] Hymac v Priestman Bros Ltd[1978] RPC 495, at 500,Morgan-Grampian v Training Personnel Ltd [1992] FSR 267, at 274-275
[9] the Plaintiffs are challenging the validity of the registration of the Chinese Mark and the Mark Device in the Mainland
[10] see §§128-129 below
[11] (5 ed), §§10-51 to 10-55 & 10-58
[12] see §§81-97 below
[13] Yifung Properties Ltd & Ors v Manchester Securities Corp & Ors, unreported, CACV 258 of 2015, 9 September 2016, at §20
[14] the Plaintiffs dispute the date which they say should be the year 2010 (see §12 above)
[15] www.childlife.cn
[16] the authorisation letters dated 25 January 2016 and 13 December 2017
[17]Guo’s 2nd Affirmation, at §21
[18] The Plaintiffs had at least two trade mark registrations in the Mainland for the mark “CHILDLIFE”: International Registration No. 880154, registered as of 6 February 2006 and International Registration No.1322202, registered as of 13 September 2016.
[19] see §§72 & 73 above
[20] see §§40-47 above
[21] p 21 of Professor Kong’s report
[22] Section 5.3 of Professor Yi’s report
[23] Article 45 of the Mainland Trade Marks Law
[24] Article 44(1) of the Mainland Trade Marks Law
[25] Article 7 of the Mainland Trade Marks Law
[26] see §§99 to 102 above
[27] see §19 above
[28] supra, see §33 above
[29] Abbot GmbH & Co KG v Pharmareg Consulting Co Ltd [2009] 3 HKLRD 524, at §94; Macau First Universal International Ltd v Ding Xiaohong [2011] 3 HKLRD 27, at §§76-79; Re Wako Giken (HK) Co Ltd [2010] 4 HKLRD 121, at §§24-25
[30] see §38(v) above
[31] see §80 above
|