XCHRX YUEN CHUK t/a NEW WANG KONG CO. v. MUHAMMAD, FAROOQ AND OTHERS t/a OSAMA INTERNATIONAL CO.

HCA14695/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.14695 OF 1998

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J U D G M E N T

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The Plaintiff's case

1. The Plaintiff is a manufacturer and seller of knitwears. It claims to be the owner of the copyright of the artistic works relating to the knitwears. The Defendants were the distributors of the Plaintiff's knitwears. They were also sellers of knitwears.

2. The Plaintiff claims that the Defendants infringed its copyright by selling 80 knitwears ("the infringing articles") of designs and patterns which were identical or substantially identical to that of the Plaintiff's designs. The purchase of the infringing articles was conducted by a private investigator hired by the Plaintiff.

The Defence

3. The Defence that was filed by the Defendants stated that :

"11(iv). The Defendants admit that 80 pieces of sweaters were sold to the Plaintiff's investigator. The Defendants deny that the sweaters were meant to be passed off as the Plaintiff's sweaters. The sweaters sold are freely available in the market and are a common design available both in Hong Kong and in China. The Plaintiff has no exclusive claim to the designs of the said 80 pieces of garments."

In para.12 of the Defence, the Defendants further admitted that they had been a seller of the Plaintiff's products but they denied that they were aware that the Plaintiff had copyright to the products.

Application for summary judgment

4. The Plaintiff now applies for summary judgment against the Defendants for :

1. a permanent injunction from infringing the Plaintiff's copyright;

2. an order for delivery up of articles in the possession of the Defendants which may infringe the injunction;

3. the Defendants to disclose on affidavit information relating to articles which may infringe the injunction;

4. enquiry for damages; and

5. order for payment of money there may be found to be due to the Plaintiff at the enquiry.

5. The Plaintiff has included in this action a claim for passing off. He is prepared to abandon this relief if he is successful in the summary judgment application.

Section 31 Copyright Ordinance

6. Under s.31 of the Copyright Ordinance ("the Ordinance"), the Defendants commit an act of infringement if they, without licence of the plaintiff, sell a copy of a work which they know or have reason to believe to be an infringing copy of the work.

Copyright

7. The first thing that the Plaintiff has to establish is that copyright exists in the artistic works. Two employees of the Plaintiff designed the patterns which were used for the knitwears. These patterns, as apparent from the drawings and the knitwears themselves, consist of some very bold floral patterns. The law in this regard is clear : all that the Plaintiff needs to show in order to claim copyright protection is that the artistic work is original, i.e. not copied from other work : L. A. Gear Inc. v. Hi-Tec Sports plc [1992] FSR 121 at 125-126. The defence that there are many traders commonly using the Plaintiff's designs and therefore the Plaintiff cannot claim copyright over them is bad in law.

Ownership

8. The Plaintiff has to show that he is the owner of the copyright. Section 121 of the Ordinance provides that an affidavit made by the owner of the copyright containing details of the copyright shall be presumed by the court, in the absence of contrary evidence, that the statements made in the affidavit are true. The Plaintiff is the owner of the copyright of the artistic works because the designs were made by his employees. He further received the assignment of the copyright. In this case, there is no contrary evidence that the statement made by the Plaintiff in the affidavit is untrue. The Plaintiff has accordingly established ownership of the copyright.

Infringing goods

9. The next question to be asked is this : were the goods supplied by the Defendants infringing goods? A comparison of the goods supplied by the Defendants with the Plaintiff's goods clearly show that the Defendants' goods are strikingly similar to that of the Plaintiff's. The patterns at the back of the garments are identical while there were variations at the front. These variations are actually patterns copied from other designs of the Plaintiff. A substantial reproduction is sufficient for infringement : s.22(3) of the Ordinance. The Plaintiff's goods are also widely sold in Hong Kong and overseas. As pointed out in L. B. (Plastics) Limited v. Swish Products Limited [1979] FSR 145 at 149 :

"That copying has taken place, is for the plaintiff to establish and prove as a matter of fact. The beginning of the necessary proof normally lies in the establishment of similarity combined with proof of access to the plaintiffs' productions."

(See also L. A. Gear.) This, the Plaintiff has established. The Defendants merely say that they obtained the 80 knitwears from a manufacturer. No other rebutting evidence has been shown on how the 80 knitwears came to be designed.

Infringement

10. Under s.23(3) of the Ordinance, the copying of three-dimensional finished products amounts to copying of the underlying two-dimensional drawings. Further, the Defendants have clearly committed the secondary infringement by selling the knitwears with the similar patterns under s.31.

Knowledge/Reason to believe

11. The only real issue in this application is whether the Defendants had knowledge or reason to believe that the knitwears they sold were infringing copies. The Defendants denied such knowledge.

12. The test, as in all summary judgment applications, is whether the defence is credible. If yes, the Defendants are entitled to have leave to defend; if not, then judgment must be entered against them. (See also the observations by the Court in Tandy/Rank Video v. Yee Hing Cassette Factory Ltd. [1991] 1 HKC 137 and Microsoft Corporation v. Electro-Wide Ltd. [1997] FSR 580.)

13. In L. A. Gear, Morritt J. held that :

"Nevertheless, it seems to me that 'reason to believe' must involve the concept of knowledge of facts from which a reasonable man would arrive at the relevant belief. Facts from which a reasonable man might suspect the relevant conclusion cannot be enough. Moreover, as it seems to me, the phrase does connote the allowance of a period of time to enable the reasonable man to evaluate those facts so as to convert the facts into a reasonable belief."

(See also ZYX Music Gmbh v. King & Others [1997] 2 All ER 929.)

Defence incredible

14. In my view, the Defendants' defence is not credible for the following reasons :

1. The Defendants were fully familiar with the Plaintiff's designs. They were the distributors of the Plaintiff's knitwears. The evidence showed that they had substantial dealing with the Plaintiff's goods in the past. They must be aware of the Plaintiff's designs. They were equally aware that the knitwears they sold had the Plaintiff's design and these knitwears did not come from the Plaintiff because they brought them from another manufacturer.

2. The neck labels on these 80 knitwears were all removed. The Defendants were fully aware of the absence of labels on the knitwears. Absence of the labels could only indicate that whoever supplied or sold the knitwears would not like others to know the real source of the supply or that these goods were not genuine goods. The Defendants must have notice that the knitwears they were selling were infringing copies.

3. When the investigator asked the Defendants to replace the knitwears without labels, the Defendants provided him with three knitwears of the Plaintiff's goods with the proper labels. This is another indication that they must have knowledge that the knitwears they were selling were infringing copies and could not bear the Plaintiff's neck labels.

4. There were evidence that the Defendants had been soliciting business of the other customers of the Plaintiff by offering knitwears of the same design at cheaper prices. One of these customers was also a distributor of the Plaintiff and the Plaintiff only offered one price to all distributors.

5. There were cosmetic changes to the knitwears sold by the Defendants to make them look slightly different. This must be for the purpose of concealing copying. The Defendants are experienced businessmen. They, as sellers of knitwears, must have knowledge or reason to believe that they were dealing with infringing articles.

6. The Defendants' knowledge of the process of knitting the pattern into the knitwear is another confirmation that they knew and had reason to know that the knitwears were infringing copies. The designs on the Plaintiff's knitwears were knitted by way of computer programming whereas the infringing copies were done by way of punchcards which is a simpler and less expensive way of knitting. They sold knitwears with the same patterns but with cheaper price.

7. The Defendants' contention that they bought the 80 knitwears in cash without seeing or inspecting them is simply incredible.

8. The Plaintiff had personally attended the Defendants' shop on 13th July 1998 and warned them not to deal with the infringing knitwears. The Defendants must have by then, if not earlier, the necessary notice that they were dealing with infringing knitwears. In any event, the writ of summons that was issued on 31st August 1998 clearly set out the Plaintiff's complaint of copyright infringement. Yet the Defendants gave no undertaking to cease the infringing act. In L. A. Gear, Nourse L.J. in the Court of Appeal stated that :

"I think it very clear that by 9 October (i.e. the date of the writ), at the latest the defendant had knowledge of facts from which a reasonable man would have believed that its shoe was an infringing copy of drawing. The key event was the defendant's receipt of the letter of 18 September. There was plenty of time between then and 9 October for the facts to be evaluated and converted into a reasonable belief. Since the test is an objective one, there is no possibility of this issue being decided in favour of the defendant at a trial. I would therefore decide the fourth question (i.e. whether the defendant had reason to believe that an article was an infringing copy), like the first three, in favour of the plaintiff."

Staughton L.J. stated that :

"Even if the defendant had not had the knowledge required by section 23 when the writ was issued on 9 October 1989, I do not consider that this would necessarily have been an answer to the claim for an injunction. By that date the defendant had demonstrated an intention to deal in shoes which did, in fact, constitute a secondary infringement. If in the course of proceedings the defendant had acquired the relevant knowledge and had the opportunity to digest it, but still was not disposed to admit that plaintiff's right, in my opinion an injunction might well have been justified. Other remedies, however, such as delivery up or destruction, would not have been appropriate."

In this case, by the date of the receipt of the writ, the Defendants must have the knowledge and the reason to believe that they were dealing with infringing copies. If there was anything that the Defendants did not know, it could only be because they deliberately shut their eyes to it : see ZYX Music.

Deliberate risk

15. As pointed out by the Court in Sillitoe and Others v. McGraw-Hill Book Company (U.K.) Ltd. [1983] FSR 545 at 557 :

"Once a plaintiff fixes a defendant with notice of the facts relied on as constituting an infringement, the defendant cannot contend that he is without 'knowledge' within section 5(2) because he has in good faith a belief that in law no infringement is being committed. .... If a person takes a deliberate risk as to whether what he is doing is wrong in law, I do not see that he can say later that he did not, at the time, know that what he was doing was wrong, if, in the event, his action is held to be wrong."

Conclusion

16. In the end, I find the Plaintiff is entitled to succeed in his application. There is no evidence to the Defendants' contention that this was a plot against them. Their contention that the Plaintiff sued them because of "business jealousy" is irrelevant. Accordingly, I shall give judgment to the Plaintiff as claimed.