PCCW HKT DATACOM SERVICES LTD AND ANOTHER v. HONG KONG BROADBAND NETWORK LTD

HCA 2049/2015

[2018] HKCFI 2037

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2049 OF 2015

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J U D G M E N T

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Background

1.  This is a claim of trade mark infringement, but in essence, the case is on comparative advertising and the dispute turns on whether the Defendant’s use of the Plaintiffs’ trade marks in the Defendant’s advertisements can be said to be in accordance with honest practices in industrial or commercial matters, such as to afford to the Defendant a defence under s 21 of the Trade Marks Ordinance (“Ordinance”).

2.  The Plaintiffs are the registered proprietors of the trade marks “HKT”, “eye”, “PCCW” and “電訊盈科” (“Marks”), which are registered for (inter alia) telecommunication services, provision of telecommunication access to the internet, entertainment services over the internet, communication by fiber optic networks, data communications services by electronic means, and telephone services (“Plaintiffs’ Services”).  The Plaintiffs, together with Hong Kong Telecommunications (HKT) Limited (“HKT”), PCCW-HKT Telephone Limited (“PCCW-HKT”), CSL Mobile Ltd (“CSL”) and PCCW Media Ltd (“PCCW Media”) are all part of the PCCW-HKT group of companies (“Group”), which holds interests in telecommunications, media, IT solutions and other businesses in Hong Kong.  Companies within the Group, including but not limited to HKT, PCCW-HKT, PCCW Media and CSL have been licensed, authorized or permitted to use the Marks in relation to the provision of the Plaintiffs’ Services.

3.  The Defendant is incorporated in Hong Kong and carries on business in the provision of telephone and internet services in Hong Kong.  It is a competitor of the Group, including the Plaintiffs.

The Advertisements

4.  From February to April 2015, the Defendant used signs identical to the Marks in advertisements which they published to identify a target audience, namely users of home telephone services provided by the Plaintiffs and/or the Group, as well as users of bundled home telephone and broadband services provided by the Plaintiffs and/or the Group.

5.  The advertisements of which complaint is made by the Plaintiffs in this case (“Advertisements”) have straplines or catchphrases which read:

(1) HKT家居電話用戶 轉軚是時候

(2) PCCW Home Telephone Service customers say goodbye to bloated monthly fees!

(3) PCCW Home Telephone and eye Communications Service customers Say goodbye to bloated monthly fees

(4) 電訊盈科家居電話及eye用戶 唔駛再忍受咁大食嘅家居電話用費

(5) 電訊盈科家居電話用戶唔駛再忍受咁大食嘅家居電話用費

6.  There is no dispute that the Defendant had used the Marks in the Advertisements.  The Plaintiffs rely on ss 18 (1) and 18 (4) of the Ordinance to claim infringement.  The Defendant’s defence invokes s 21 of the Ordinance, the relevant subsections of which provide as follows:

“(1) Nothing in section 18 (infringement of registered trade mark) shall be construed as preventing the use by any person of a registered trade mark for the purpose of identifying goods or services as those of the owner of the registered trade mark or a licensee, but any such use which is otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark.

(2) In determining for the purposes of subsection (1) whether the use is in accordance with honest practices in industrial or commercial matters, the court may consider such factors as it considers relevant including, in particular, whether –

(a) the use takes unfair advantage of the trade mark;

(b) the use is detrimental to the distinctive character or repute of the trade mark; or

(c) the use is such as to deceive the public.”

7.  The Plaintiffs claim in paragraph 9 of the Amended Statement of Claim (“ASC”) that the Defendant’s use of the Marks in the Advertisements was without due cause, and took unfair advantage of and/or was detrimental to the repute of the Marks.  They complain that the Defendant’s use of the Plaintiffs’ Marks was to promote the Defendant’s own services and to convey the message that consumers get a better deal from the Defendant (paragraph 9 (a) of ASC).  The Plaintiffs also complain that by using the expressions“bloated fees” and “大食” (literally, big eater or gluttonous) in the Advertisements, the Defendant conveyed the erroneous, unfair and/or misleading impression to members of the consuming public that the prices for the Plaintiffs’ Services provided and marketed under and by reference to the Marks are bloated, unduly excessive and/or unreasonable (paragraph 9 (b) of the ASC).  They claim that the Defendant’s use of the Marks in the Advertisements discredits and denigrates the Marks (paragraph 9 (c)), and is detrimental to the repute of the Marks, in that “the capacity of the Marks to stimulate the consuming public’s desire to subscribe to the Plaintiffs’ Services is impaired” (paragraph 9 (d)).  For these reasons, the Plaintiffs argue that the Defendant’s use of the Marks was not in accordance with honest practices in industrial or commercial matters, within the meaning of s 21 of the Ordinance, to constitute an exception to infringement.

8.  With regard to the “eye” mark, although the Plaintiffs have no evidence that the Defendant’s acts of infringement complained of took place after the date on which the said mark was registered, they rely on the fact that all the Marks (including the “eye” mark) are well-known trade marks, which are entitled to protection under s 18 (4) of the Ordinance, and that the Defendant’s use of the “eye” mark in the Advertisements was without due cause, took unfair advantage of, or was detrimental to the distinctive repute of the said mark, such as to constitute infringement under s 18 (4) of the Ordinance.

9.  On the Defendant’s part, it claims that the tenor of the Advertisements is that the home telephone service, and the bundled home telephone and broadband services, provided by the Defendant are less expensive than the same or similar services provided by the Plaintiffs and/or the Group.  The Defendant relies on evidence to show that, at the material time when the Advertisements were published (in February to April 2015) the actual price paid by users of the basic home telephone service provided by the Defendant was lower than the actual price paid by users of the basic home telephone service provided by the Plaintiffs and/or the Group; whereas for (1) home broadband service and (2) home telephone bundled with broadband services, the service prices offered by the Defendant were consistently lower than those offered by the Plaintiffs and/or the Group.  The Defendant claims that in fact, the service prices offered by the Plaintiffs and/or the Group for these services were the highest amongst the major broadband service providers in Hong Kong.

10.  Accordingly, the Defendant claims that a reasonable reader of the Advertisements who was aware of the full facts was likely to take the view (at the material time) that the Advertisements were in fact honest, and that the representations contained in the Advertisements were true, and not misleading in any material respect (paragraph 8 (2) of the Amended Defence).  The Defendant claims that by using the Marks to identify the services of the Plaintiffs, and stating the truth in a fair comparison as to the pricing offered, the Defendant’s use of the Marks in the Advertisements did not take unfair advantage of either the Plaintiffs’ Marks or the power of attraction of such Marks, nor did their use tarnish the reputation of the Marks, or free-ride on the repute of the Marks.  The Defendant alleges that the use of the expressions “bloated” and “大食 (big eater, ie gluttonous)” was not unfair in the context, was mere advertising language or puff, and did not have any discrediting or denigrating effect (as alleged by the Plaintiffs), when read in their context (paragraph 13 (9) of the Amended Defence).

The relevant law

11.  Appreciation must be extended to Leading Counsel on both sides for their detailed analyses of the history and summary of the English cases which were decided under the English Trade Mark Act 1994 (“1994 Act”), before and after Directives 84/450 EEC, 89/104 EEC and 97/55 EEC of the Council of the European Union were adopted, in support of their arguments as to whether these cases are relevant to this Court’s determination of the issues in dispute in this case. 

12.  On behalf of the Defendant, Ms Chan SC seeks to rely on the decisions of the English court in Barclays Bank PLC v RBS Advanta [1996] RPB 307, Vodafone Group PLC & Anor v Orange Personal Communications Services Ltd [1997] FSR 34, Cable and Wireless PLC v British Communications PLC [1998] FSR 383 and British Airways PLC v Ryanair Ltd [2001] FSR 541.  In these cases, the English court explained that the primary objective of s 10 (6) of the 1994 Act, which is the equivalent of s 21 of the Ordinance, is to permit comparative advertising, and there is no trade mark infringement unless the use of the mark is not in accordance with honest practices.  The advertisement in question should be considered as a whole, and if applying an objective test, a reasonable reader, upon being given the full facts, would be likely to say that the advertisement is not honest, then there is infringement.  In both Cable & Wireless PLC and British Airways PLC, Jacob J applied the “average consumer test”, highlighting that the average consumer is used to hyperbole and puff in advertising, and if the average consumer considers that in substance, the advertisements were sufficiently true, or there is no reasonable likelihood of a significant number of people being misled to any significant degree, the proviso in s 10 (6) requiring the use of the registered trade mark to be accordance with honest practices would be satisfied.

13.  Section 10 (6) of the 1994 Act is largely in similar terms as s 21 of the Ordinance:

“Nothing in the preceding provisions of this section shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor or a licensee.

But any such use otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark if the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.”

14.  On behalf of the Plaintiffs, Mr Yan SC argued that the English decisions relied upon by Ms Chan should not be followed, as they had applied the wrong test for construing honest practices, without proper consideration of Directive 89/104 EEC of 21 December 1988 to approximate the laws of the Member States relating to trademarks (“TM Directive”), and Directive 97/55/EC of the European Parliament and of the Council of 6 October 1997 amending Directive 84/450/EEC concerning misleading advertising so as to include comparative advertising (“97 Directive”).

15.  In the hope of not doing any injustice to the submissions made by Mr Yan, the gist of his submissions is as follows.  The principal basis for the 1994 Act was the TM Directive, since the 1994 Act was to make new provision for registered trade marks, in order to implement the TM Directive to approximate the laws of Member States of the European Economic Community relating to trade marks.  The European Court of Justice (“ECJ”) requires the TM Directive to be interpreted in conformity with the 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) and obliges national laws to be interpreted by national courts as far as possible in conformity with the TM Directive as it is interpreted by the ECJ.  In interpreting the 1994 Act, the English courts have accordingly paid attention to the wording of the provisions of the TM Directive, and have sought guidance from the ECJ, the decisions of which are considered most authoritative by the English courts.  Mr Yan highlighted that the concept of “honest practices in industrial or commercial matters” has its origins in Article 10bis (2) of the Paris Convention for the Protection of Industrial Property.  The same wording is found in Article 6 of the 1988 Directive, and in s 11 (2) of the 1994 Act, and such wording has been considered in decisions of the ECJ and the Court of Justice of the European Union.

16.  These authorities, and the decisions of the English court applying the relevant Directives, have established that the concept of “honest practices in industrial or commercial matters” constitutes “in substance the expression of a duty to act fairly in relation to the legitimate interest of the trademark proprietor”, such that the use of a trade mark will not be in accordance with honest practices if:

(1) it is done in such a manner as to give the impression that there is a commercial connection between the third-party and the trade mark owner;

(2) it affects the value of the trade mark by taking unfair advantage of its distinctive character or repute;

(3) it entails the discrediting or denigration of the mark; or

(4) where the third-party presents its product as an imitation or replica of the product bearing the trade mark of which it is not the owner.

Mr Yan relies on Gillette v LA-laboratories Ltd [2005] ETMR 67, Anheuser-Busch v Budejovicky Budvar [2005] ETMR 27, Celine SARL v Celine SA [2007] ETMR 80 and Hotel Cipriani SARL v Cipriani (Grosvenor Street) Ltd [2009] RPC 9.  To the extent that the English court had failed to give effect to the relevant Directives issued by the Council of the European Community in its interpretation of “honest practices in industrial or commercial matters”, those decisions should not be followed.  Mr Yan argued that the earlier English cases relied upon by Ms Chan failed to give due regard to the duty to act fairly in relation to the legitimate interest of the trade mark proprietor, the court in those cases having put the wrong focus on the honesty of the third-party using the trade mark of the proprietor, and in judging whether the third-party/alleged infringer had acted honestly simply by whether the advertisement complained of was “significantly misleading”.  No proper regard was given to the second half of the proviso, whether “the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark”. 

17.  Mr Yan highlighted the fact that it was only in the later cases of Gerolsteiner Brunnen v Putsch (in 2004), Anheuser-Buch v Budejocicky Budvar (in 2005) and Gillette v LA-laboratories Ltd (2005), that the English court referred to the interpretation and guidance which had been provided by the ECJ, that the phrase “honest practices in industrial or commercial matters” constitutes in substance the expression of a duty to act fairly in relation to the legitimate interests of the trade mark proprietor”.  These decisions were to the effect that there is infringement, where the third-party use might be regarded as unfair competition (Gerolsteiner and Cipriani in 2008) or where unfair advantage had been taken of the distinctive character or repute of a trade mark, or where the use discredits or denigrates the mark (examples given in Gillette).

18.  I accept the submissions of Mr Yan to the extent that, as the Court of Final Appeal pointed out in Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (No 2) (2016) 19 HKCFAR 20, the Hong Kong Court is bound to favor an interpretation of the Ordinance which is consistent with the international obligation found in TRIPS - if there are several reasonably possible interpretations of a provision in the Ordinance. 

19.  Article 16 (1) of TRIPS sets forth the rights conferred on the owner of a registered trade mark:

“The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In the case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed…”

20.  Exceptions to the rights conferred on the owner of a registered trademark are permitted under Article 17 of TRIPS, which provides as follows:

“Members may provide limited exceptions to the rights conferred by a trademark, such as the use of descriptive terms, provided that such exceptions take account of the legitimate interests of the owner of the trademark and of third parties.” (Emphases added)

Mr Yan highlighted that limited exceptions are mandated so long as the legitimate interests of the owner of the trademark and of third parties are taken account of.

21.  The defence contained in s 21 of the Ordinance (and s 10 (6) of the 1994 Act) constitutes one of the exceptions to the rights conferred by a registered trademark.  Accordingly, such exceptions are required by Article 17 of TRIPS to take account of the legitimate interests of the owner of the trademark, and of third parties.  According to Mr Yan, since both s 10 (6) of the 1994 Act and s 21 of the Ordinance borrowed the phrase “in accordance with honest practices in industrial and commercial matters” from Article 6 (1) of the TM Directive, adopting a purposive construction, the phrase must have also been adopted to “take account of the legitimate interests of the owner of the trademark and of third parties” in the same manner as this was done under Article 6 (1) of the TM Directive.  As such, Mr Yan argued that the interpretation and guidance provided by the ECJ as to the meaning of the phrase in Article 6 (1) must equally be applicable in the context of s 10 (6) of the 1994 Act and s 21 of the Ordinance.

22.  I can accept that the interpretation by the ECJ as to the meaning of Article 6 (1) of the TM Directive may be guidance and useful reference on the meaning of ss 19 (3) and 21 of the Ordinance, in the same manner as any decision of a Court applying common law on the meaning and operation of a provision which contains identical or largely similar language as that used in the Ordinance may serve as reference or guidance to this Court.  However, the fact remains that the Directives of the European Community, and the decisions of the ECJ (and of the English court), and their interpretation of the Directives, have no binding effect in Hong Kong.  We have our s 21 of the Ordinance, which sets out clearly and expressly, in s 21 (2), that in determining for the purposes of s 21 (1) whether the use of a registered mark is “in accordance with honest practices in industrial or commercial matters”, the Court “may” consider “such factors as it considers relevant”, which factors include in particular whether the use takes unfair advantage of the mark, is detrimental to the distinctive character or repute of the mark, or is such as to deceive the public.  There is no reference in s 21 as to whether the use discredits or denigrates the registered trade mark, or to the use being misleading or creating confusion, as in Article 3a of the 97 Directive.  However, the factors named in particular in s 21 (2) are only three of such factors which the Court may consider to be relevant.  There may be other relevant factors which arise from the facts and circumstances of the use of the registered mark in each individual case. 

23.  It is also clear that this Court is not bound by either the 97 Directive, or Directive 2006/114/EC, which set out conditions which must be met for comparative advertising to be permitted in the European Community.  As Ms Chan argued, the Court should not be enforcing, through the back door, any of the European Community Directives which have no effect in Hong Kong, by interpreting the honest practices proviso in s 21 of the Ordinance to mean the inclusion and incorporation of all the requirements and conditions specified in the Directives for comparative advertising.  Whether and how comparative advertising should be regulated in Hong Kong: to stimulate competition for the advantage of the consumer, in keeping prices down and improving the quality of products and services offered to the consumer, to restrict certain practices which may distort competition, or to protect vulnerable consumer groups, should be matters for the legislature, and not for the Court.

24.  In any event, it would be highly unfair and inequitable to hold any defendant, as a player in the industrial or commercial sector in Hong Kong, liable for infringement of trade mark on the basis that it had acted in a way which is not “in accordance with honest practices in industrial or commercial matters” by reason of its non-compliance with standards specified in Directives of the European Community, when such Directives have never been publicized as being applicable to the market in Hong Kong.

25.  Hence, I am not prepared to conclude (as Mr Yan urged me to do) that the decisions of the English Court in the cases on comparative advertising, and as relied upon by the Defendant, are irrelevant or wrongly decided, and should not be followed on the basis of their erroneous interpretation of “honest practices in industrial or commercial matters”.  On my reading of the judgments in those cases, the courts’ analyses of the defendants’ honesty or lack thereof, and how the advertisement complained of is to be read, are relevant and helpful to this Court’s analysis of s 21 of the Ordinance, and in the Court’s consideration of all the relevant factors, in determining whether the use of the registered marks of the proprietor is in accordance with honest practices.  As outlined in the preceding paragraphs, these factors include, but are not restricted to, whether unfair advantage was taken of the mark, whether the use made was detrimental to the character or repute of the mark, and whether the use was such as to deceive the public.  To the extent that the English court had failed to take into consideration those factors specifically mentioned in s 21 (2) of the Ordinance, they will be included in my consideration - if relevant in the circumstances of the case, and giving heed to the duty to act fairly in relation to the legitimate interests, not only of third parties, but also of the trademark owner under Article 16 of TRIPS.

26.  Ms Chan also argued that Gillette, Cipriani and Gerolsteiner were notdecided in the specific context of s 10 (6) of the 1994 Act, which is the equivalent of our s 21, but were in the context of deciding whether infringement was established under s 11 (2) of the 1994 act, which is equivalent to s 19 (3) of the Ordinance.  Whilst I accept that the context has to be borne in mind, I agree with Mr Yan that the English courts’ interpretation of “in accordance with honest practices in industrial or commercial matters” in Gillette, Cipriani and Gerolsteiner are still relevant and of assistance in the interpretation of the same phrase which is used in s 21 of the Ordinance.

27.  Mr Yan has throughout emphasized, that as explained in Gillette, the condition of “honest use” within the meaning of Article 6 (1) of the TM Directive constitutes the expression of the duty to act fairly in relation to the legitimate interests of the trademark proprietor. The exception to infringement, as provided for in s 21 of the Ordinance, has to be construed (as Mr Yan also argued) in accordance with Article 17 of TRIPS.  In this context, as Ms Chan also highlighted, Article 17 states that in providing for exceptions to the rights conferred by a trademark, such exceptions should take account of the legitimate interests of not only the owner of the trademark, but also the legitimate interests of third parties.  Such third parties would include consumers, and other traders or competitors of the trademark owner.  Their legitimate interests are relevant considerations.

28.  In the Court of Final Appeal’s decision in Tsit Wing, reference was made to the judgment of Lord Diplock in General Electric Co Ltd (USA) v General Electric Co Ltd [1973] RPC 297, 326.  The judgment of Lord Diplock contained an interesting reminder on the property right of a proprietor of a trade mark, and that such right of property “calls for an accommodation between the conflicting interests of the owner of the monopoly, of the general public as purchasers of goods to which the trade mark is affixed, and of other traders”.  The law of registered trade marks and of passing off has always involved a balancing of the different competing interests of interested and affected parties.  As Gummow NPJ explained in Tsit Wing (at paragraph 23):

“First, there is the interests of the plaintiff in protecting the commercial advantage or “goodwill” flowing from its recognition and reputation with customers and prospective customers, secondly there is the interest of the defendant in attracting custom by what to it appears an effective means, and thirdly, the interest of consumers and potential consumers in selecting goods and services without the practice upon them of misrepresentation as to the provenance of the defendant’s goods or services.”

29.  Section 21 of the Ordinance is another illustration of the need to balance such competing interests, and the Court’s exercise of such balancing of interests.

30.  Ms Chan submits and highlights that the primary objective of s 21 is to permit comparative advertising.  I do not understand Mr Yan to be taking objection to that, since he also relies on and cites para 13-71 of Kerly’s Law of Trade Marks & Trade Names, 13^th edition, which states:

“The White Paper, Reform of Trade Marks Law, September 1990, noted at para 3.28, that comparative advertising was regarded as more acceptable than it used to be but it was still generally felt that an advertiser should not be free to ride on the back of a competitor’s trade mark. Accordingly it was provided that section 4 (1) (b) of the 1938 Act would be replaced by a provision allowing a trade mark owner to restrain use in advertising which was contrary to honest practices in industrial or commercial matters and would take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark. This is reflected to in the statement of Lord Strathclyde, Minister of State, Department of Trade and Industry, on behalf of the Government:

‘The government have been persuaded that there is no harm in comparative advertising … provided that it makes fair use of a registered trademark for the purpose of informing the public.  As foreshadowed in the White Paper, the Bill seeks to chart a middle course: allowing comparative advertising but providing safeguards for the owner of a registered trade mark.’”

Mr Yan in fact pointed out that in enacting the 1994 Act, the UK legislature had decided, not only to implement Articles 6 and 7 of the TM Directive, but to provide for the further defence introduced under s 10 (6), which is the equivalent to s 21 of the Ordinance.

31.  In Barclays Bank PLC v RBS Advanta [1996] RPB 307, Laddie J also reiterated that the primary objective of s 10 (6) of the 1994 Act was to allow comparative advertising (as long as, on His Lordship’s construction - and which is now challenged by Mr Yan - the use of a competitor’s mark is honest), and that s 10 (6) should not be construed in a way which effectively prohibits all comparative advertising.  I agree that overall, s 21 should not be construed in a way which will prohibit all comparative advertising, as otherwise the purpose of providing for the exception would be lost.  However, I accept Mr Yan’s submission that the legitimate interests of the trade mark proprietor have to be considered and borne in mind, and this is also provided for in s 21 (2).

32.  If comparative advertising is to be allowed, I note, and express agreement with, the observations made by Lewison J (the 1^st instance trial judge) in O2 Holdings Ltd, O2 (UK) Ltd v Hutchison 3G Ltd [2006] EWHC 534, that it is to be expected that, in comparative advertising, the defendant advertiser will not paint the claimant’s goods in a particularly favorable light.  A “certain degree of robustness” is to be expected in comparative advertising, for it to serve its cause.  Even an objective comparison, made fairly and honestly, that shows the advertiser in a better light than his competitor is bound to undermine the competitor.  To that extent, as Lewison J remarked, the concept of “unfair advantage”, in the sense of a third party unfairly using the registered mark of its competitor to enhance his own business, does not fit easily into comparative advertising, and has to be applied in the proper context.

Applying the relevant law to the Advertisements and the facts

33.  It does not appear to be disputed that in considering whether the use of the Marks was in accordance with honest practices, or had taken unfair advantage of the distinctive characteristics or repute of the Marks, a “global assessment” of the use in the Advertisements is necessary, taking all relevant factors and circumstances of the case into account, on the objective test of a reasonable reader (Specsavers International Healthcare Ltd v ASDA Stores Ltd [2012] FSR 19, L’Oreal SA v Bellure NV [2009] ETMR 55, Barclays Bank PLC v RBS Advanta [1996] RPB 307). 

34.  Inconstruings 10 (6) of the 1994 Act, Laddie J noted in Barclays Bank PLC v RBS Advanta:

“As a general proposition, it seems to me…that the primary objective of section 10 (6) is to allow comparative advertising. As long as the use of a competitor’s mark is ‘honest’, then there is nothing wrong with telling the public of the relative merits of competing goods or services and using registered trademarks to identify them. The proviso should therefore not be construed in a way which effectively prohibits all comparative advertising…

Secondly, there will be no infringement unless the use of the registered trademark is not in accordance with honest practices.  Both counsel agreed, rightly in my view that this testis objective.  This part of the proviso simply means that if the use is considered honest by members of a reasonable audience, it will not infringe.  The fact that the advertising pokes fun at the proprietor’s goods or services and emphasizes the benefits of the defendant’s is a normal incidence of comparative advertising.  Its aim will be to divert customers from the proprietor.  No reasonable observer would expect one trader to point to all the advantages of its competitor’s business and failure to do so does not per se take the advertising outside what reasonable people would regard as ‘honest’.  Thus mere trade puffery, even if uncomfortable to the registered proprietor, does not bring the advertising within the scope of trademark infringement.  Much advertising copy is recognized by the public as hyperbole.  The Act does not impose on the courts an obligation to try to enforce, through the back door of trademark legislation, a more puritanical standard.  If, on the other hand, a reasonable reader is likely to say, on given the full facts, that the advertisement is not honest, for example because it is significantly misleading, then the protection from trademark infringement is removed.”

35.  I bear in mind Mr Yan’s criticism that the judgment and observations of Laddie J in Barclays Bank placed erroneous emphasis on the part of the proviso which refers to “in accordance with honest practices”, without adequate regard to the latter part of the proviso of s 10 (6) and its references to the use taking unfair advantage of and being detrimental to the distinctive character or repute of the trade mark.  Nevertheless, I do not regard the rest of the observations made by Laddie J, on how advertisements should be read, on the aims of comparative advertising, and how “honesty” can be assessed, to be either wrong, or inapplicable to the situation in Hong Kong.  The average consumer in Hong Kong can be said to be just as savvy to advertising language, exaggeration and trade puffery as the average consumer in the UK - if not the more so, bearing in mind the colloquial and often colourful and exaggerated terms frequently and commonly used in the Chinese media in Hong Kong.  Just by way of illustration, a reasonable consumer and reader of advertisements in Hong Kong would be impervious to straplines describing a residential unit “with unrivalled seaview” for sale, well knowing that in reality, that description would mean in most cases no more than a narrow view of water, seen through gaps in buildings fronting the unit in question.  When real estate in Kowloon is advertised against a backdrop of the French Riviera, consumers in Hong Kong can only be skeptical and hardened against advertising puffery.  To such extent, the average reader and consumer is well educated in the inherent exaggeration of advertising in Hong Kong, and will not be inclined to take advertising language seriously, without a healthy dose of skepticism.

36.  In Vodafone Group PLC v Orange Personal Communications Services Ltd [1997] FSR 34, Jacob J observed thus:

“This is a case about advertising. The public are used to the ways of advertisers and expect a certain amount of hyperbole. In particular the public are used to advertisers claiming the good points of the product and ignoring others, advertisements claiming you can save ‘£££...’ are common, carrying with them the notion that ‘savings’ are related to amount of spend, and the public are reasonably used to comparisons – ‘knocking copy’ as it is called in the advertising world. This is important in considering what the ordinary meaning may be. The test is whether a reasonable man would take the claim being made as one made seriously, De Beers Abrasive Products Ltd v International General Electric Co of New York Ltd [1975] 1 WLR 972: the more precise the claim the more it is likely to be so taken - the more general or fuzzy the less so.” (Emphasis added)

37.  Again, leaving apart Mr Yan’s criticisms on the correctness of the tests applied by the English court in the older decisions on honest practices, I regard the above observations made by Jacob J to be apt and relevant, first, in determining the meaning of words used in advertising, and what they convey to the public, and further, in deciding whether or not an advertisement which incorporates a defendant’s use of a plaintiff’s trade mark can be said to be “misleading”, or “deceiving”, in the context of the matters to be considered under s 21 (2) of the Ordinance. 

38.  It is for the Plaintiffs, as registered proprietors of the Marks, to show that the factors indicated in s 21(2) of the Ordinance exist, and that the Defendant’s use of the Marks was otherwise than in accordance with honest practices in industrial or commercial matters.  This is not disputed.

39.  Nor is it disputed that in deciding whether there is infringement, and whether there is use in accordance with honest practices, the matter is to be determined objectively, taking into consideration all the surrounding circumstances of the use complained of and the context, and carrying out a global assessment of matters “in the round”.

Meaning of the words used in the Advertisement

40.  It is important first to identify the meaning of the words used in the Advertisements.  Only after ascertaining such meaning, and the message conveyed by the Advertisements, can the Court decide whether the words as used and the message conveyed are sufficiently true, whether the use of such words takes unfair advantage of the Marks, or is detrimental to the repute of the Marks, or is such as to deceive the public.

41.  In my considered view, given the fact that the average consumer and reasonable reader of the Advertisement in Hong Kong is more than used to hyperbole and exaggeration, the words complained of by the Plaintiffs, namely “bloated” and “大食”, mean no more than “expensive”, expressed in sensational and colored language, as is usual in advertising.  The average consumer of electronic communications service in Hong Kong is accustomed to price comparison and assertions of good, better or the best deals in monetary terms, claims made in a highly competitive and fast moving market.  The average consumer reading the Advertisements will not expect to find, or look for, a serious comparison of details, nor an itemized analysis of the terms offered.  The reasonable person realises that he/she is not reading a research paper.  The attraction and focus of the Advertisements and straplines are simply the headline price for a general category of service.  The message conveyed by the Advertisements is simply that a customer will get a cheaper price of $99 per month, by subscribing to the Defendant’s home telephone and fiber optic broadband service, instead of using the Plaintiffs’ same services at their expensive (“bloated/大食”) monthly fees.  That is the “take home message”.

42.  I do not consider that the average reasonable reader will take the statements in the Advertisements seriously, to carry any broader meaning, that the Plaintiffs’ prices will “invariably” be cheaper than the Defendant’s, in all cases, irrespective of the location, term of the plan, and combination of the services sought.  Nor do I consider that to the average reader hardened to advertising language in Hong Kong, “bloated” or “大食” will be considered to carry any derogatory or sinister meaning, of the Plaintiffs cheating their customers.  The words simply poke fun at the Plaintiffs’ prices, and will be reasonably understood as such.

Does the use deceive the public or mislead?

43.  Under s 21 (2) of the Ordinance, in determining whether the use of a trade mark for the purpose of identifying services as those of the owner of the mark is otherwise than in accordance with honest practices, the court may consider such factors as it considers relevant including whether the use “is such as to deceive the public” (s 21 (2) (c)). 

44.  In Vodafone Group Plc v Orange Personal Communications Services Ltd, Jacob J found that on an objective test of the ordinary reader, the advertisement in question was not false.  He held that a comparative advertisement used a trade mark otherwise than in accordance with honest practices if it was objectively misleading to a substantial proportion of the reasonable audience, and if it was so misleading, then the use of the plaintiff’s trade mark in the advertisement would be an unfair advantage taken of the distinctive character or repute of the notoriety of the mark.

45.  On the evidence adduced in this case, which includes the figures compiled by the Defendant’s market intelligence team, and the survey conducted by Media Partners Asia Ltd (an independent industry consultant) in December 2014, the Plaintiffs’ prices for fixed line telephone service were, largely, more expensive than those of the Defendant. 

46.  I fully accept the evidence of Mrs Selina Chong, the Chief Marketing Officer of the Defendant at the material time.  She was a most impressive witness, in terms of her experience and her knowledge of the trade and market.  Her evidence on the state of the telecommunications market in Hong Kong, the competition in the different services and market segments, on sale and marketing strategies, and on the manner and practice of the Defendant’s collection of market intelligence, was all clear and convincing, and demonstrated her in-depth knowledge of these matters.  Mrs Chong’s evidence was unchallenged and not undermined in any way.  In light of her evidence, the comparison tables produced by the Defendant and its evidence on the prices offered by the different service providers at the material times are all convincing, and reliable.  In any event, I have not seen any substantive evidence which sheds doubt on the evidence produced by Mrs Chong and her team.

47.  The evidence and comparison tables compiled by the Defendant show that, save for broadband only service in public housing estates with 500 Mbps access, the Defendant’s prices were indeed less expensive than those of the Plaintiffs.  In most if not all cases, the Plaintiffs’ prices have in fact been shown on the evidence to be the most expensive of all the service providers in Hong Kong of those services.  This is so, even after giving credit for and making deductions from the Plaintiffs’ prices to reflect the value of gifts and benefits which were extended to their customers under the relevant monthly plans.

48.  Leading Counsel for the Plaintiffs sought to argue that the Plaintiffs’ home telephone service was not invariably more expensive than the Defendant’s.  The Advertisements were used from February to April 2015.  The Plaintiffs argued that in 2015, around 20% of subscribers of the Plaintiffs’ home telephone service paid a net monthly fee of $98 per month or less, that they had introduced a $38 monthly plan in 2013 and 2014 to residents of public housing and home ownership scheme estates, and that there were subscribers of a $66 monthly plan in 2012 and 2015.

49.  The Defendant argued that the monthly plans relied upon by the Plaintiffs were only made available to a limited category of customers, were not always on offer, nor widely promoted, highlighting that the Plaintiffs were only able to provide one contract (dated April 2017) of a customer who enjoyed the $38 monthly plan, and one contract (dated September 2014) of a customer who enjoyed the $66 monthly plan.  The Defendant maintains that on the evidence at trial, the Defendant’s home telephone service was plainly less expensive than that of the Plaintiffs’ before, and during, the period of the Advertisements. 

50.  The Plaintiffs sought to highlight the fact that the Defendant had not applied for specific discovery of the Plaintiffs’ documents relating to, or which prove the existence of, contracts signed between the Plaintiffs and their customers for the provision of home telephone services at monthly fees of $98 or less.  They argued that for that reason, it was not open to the Defendant to cast doubt at trial on the existence of such plans offered to and accepted by customers.  There is little point to this.  It is for a party and those advising it to decide what documents are relevant to its case, and to prepare such documents and evidence to prove its case or to discredit its opponent’s, for use at trial.  If the Plaintiffs considered that it was unnecessary, or disproportionate, to extract documents for disclosure and use for trial, it is not open to it to excuse such absence of evidence by putting the blame on its opponent, for not seeking or pursuing its request for specific discovery.

51.  In any event, I accept the submissions made by Ms Chan, that it is not necessary for the Defendant to prove that the Plaintiffs’ prices were invariably more expensive than the Defendant’s.  On the contrary, the onus is on the Plaintiffs to show that the Defendant’s use of the Marks in the Advertisements were not in accordance with honest practices.

52.  On the entirety of the evidence available at trial, I am satisfied that the statement in the Advertisements, that the Plaintiffs’ prices for their home telephone and broadband services are more expensive than the Defendant’s prices, is substantially and sufficiently true (British Airways Plc v Ryanair Ltd).  It is not misleading to a substantial proportion of the reasonable audience (Vodafone Group Plc v Orange Personal Communications Services Ltd), to be dishonest, nor is it deceiving to the public (the factor mentioned for consideration in s 21 (2) (c)). 

53.  The Plaintiffs sought to argue that one possible meaning of the words “bloated/大食” is that the Plaintiffs are overcharging their customers.  I have found that these words mean “expensive” to the average, reasonable reader of the Advertisements.  However, if they do convey the meaning of overcharging as the Plaintiffs contend, that may well be justified in the eyes of the reasonable reader of the Advertisements given all the facts.  If all or most service providers in Hong Kong can offer home telephone and similar broadband services at prices lower than the Plaintiffs, then it is substantially true that the Plaintiffs may be overcharging.  The Plaintiffs have not in this case presented any evidence or argued their case on the basis of the quality of the Plaintiffs’ Services, and their being superior to those provided by the Defendant or their other competitors, to justify any higher costs.

Does the use take unfair advantage of the Plaintiffs’ Marks?

54.  As Ms Chan emphasized, the purpose of comparative advertising is to draw distinctions and point out differences between the goods or services of the registered owner of the trade mark and those of the advertiser.  In this case, the Advertisements point out that the Defendant’s prices for their services are less expensive and lower than those of the Plaintiffs.  The Defendant did not seek by the Advertisements to benefit by calling to mind the value of the Marks or the Plaintiffs’ services, and to benefit from it by building on the attributes of the Marks in order to claim its own qualities.  As explained by the Court of Justice in L’Oreal SA v Bellure NV [2009] ETMR 55:

“As regards the concept of ‘taking unfair advantage of the distinctive character or the repute of the trade mark’, also referred to as ‘parasitism’ or ‘free-riding’, that concept relates not to the detriment caused to the mark but to the advantage taken by the third party as a result of the use of the identical or similar sign. It covers, in particular, cases where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation.”

55.  As used in the Advertisements in this case, there is no unfair advantage taken of the Marks, as distinct from the type of association dealt with in cases such as Specsavers International Healthcare Ltd v ASDA Stores Ltd [2012] ETMR 40, and L’Oreal SA v Bellure NV [2009] ETMR 55.  The purpose of the Advertisements is to disassociate the Defendant and its services from those of the Plaintiff, rather than to suggest an impression of connection with the Plaintiffs, so as to benefit from it.

56.  As observed by Lewison J in O2 Holdings Ltd v Hutchison 3G Ltd [2006] ETMR 55 (at paragraph 139 of the judgment), the mischief of an unfair advantage occurs where the defendant would increase his sales by feeding on the reputation acquired by the owner of the earlier mark, or where the claimants’ mark supports or would support the defendant’s mark.  This, His Lordship pointed out, “does not fit easily with comparative advertising where it is the contrast between some feature of the advertiser’s business and that of his competitor which constitutes the enhancement”.  The contrast between the two marks is the entire point.

57.  Section 21 (2) refers to “unfair advantage” being taken of the trade mark.  Not only must there be advantage which was taken, but such advantage must be unfair.  Even if it can be said that by referring to the Plaintiffs’ Marks, the use of the Marks in the Advertisements took “advantage” of the Marks, by riding on their coat-tails and reputation, despite the contrast made in the differences in the pricing characteristics of the services of the Plaintiffs and the Defendants, the message conveyed in the Advertisements is substantially true, and not misleading: that the Plaintiffs’ services are more expensive than the Defendant’s.  For that reason, any advantage arguably taken of the Marks in the comparative advertising is not “unfair”. 

58.  In the overall context of the Advertisements, I find that the use of the Marks does not take unfair advantage of the Marks.

Is the use detrimental to the repute of the Marks?

59.  Using the language employed in the 97 Directive, Mr Yan argued that the use of “bloated/大食” in the Advertisements “denigrates” the Marks, so as to be not in accordance with honest practices.  “Denigration” is not referred to in s 21 (2), and the 97 Directive has no binding effect in Hong Kong.  Nevertheless, it may be a factor which the Court can take into consideration under s 21 (2), if it considers such a factor exist and to be relevant, in furthering the duty to take account of the legitimate interests of the owner of the trademark under TRIPS.  I consider this in conjunction with the use being detrimental to the repute of the Marks (which is expressly referred to in s 21 (2)), of which Mr Yan also complains.

60.  I have found that to the average reasonable consumer reading the Advertisements in Hong Kong, “bloated/大食” simply means “expensive”.  I do not agree that the reasonable reader will take the description of the Plaintiffs’ services and prices (as bloated/大食) to mean that the Plaintiffs are cheating their customers, or that they are dishonest, as the Plaintiffs suggest.  As Laddie J had observed in Vodafone Group PLC, the test is whether a reasonable man would take the claim being made as one made seriously, and in the round, I do not consider that the reasonable reader of the Advertisements will take the claim of “bloated/大食” seriously, to carry any negative connotation or sinister meaning of cheating or dishonesty.  As I have pointed out in the earlier parts of this Judgment: in comparative advertising, it is to be expected that a defendant will not paint the claimant’s goods in a particularly favorable light.  To be unnecessarily puritanical in the construction of advertising language, and to take a straightlaced approach, would defeat the purpose of effective comparative advertising, which is allowed under s 21 of the Ordinance in the interests of protecting the general benefit of consumers, and to permit fair competition.

61.  I have also found on the evidence that the statement as to the Plaintiffs’ services being more expensive than the Defendant’s to be sufficiently and objectively true.  A statement of truth cannot be detrimental to the reputation of the Marks, even if the Plaintiffs find it uncomfortable to be confronted with a substantial truth.

62.  It is not disparaging to refer to the Plaintiffs’ service as being expensive.  The expense may be perceived to be associated with better quality of service.  In other goods or services, a high price tag may denote prestige and exclusivity.

63.  The Plaintiffs themselves appear to accept that “price is not really the way that (they) compete” - to use the words of their Group Managing Director, Mr Alexander Arena, when presenting the interim results for HKT for 2015.  When Mr Arena was questioned on competition in the fixed-line telephone and broadband business, he said this:

“On the fixed-line side, …the market is really bifurcated. There is a group of competitors that chases the price conscious customers and then there’s us. And we’ve been around better quality of service, proper service level arrangements, being able to repair quickly, being able to add functionalities… and things like that.

So we’ve seen our whole role is improving what we offer to the customer and therefore getting rewarded for it, but the market is still dominated by players that want to basically work on price. Cheap, cheap, cheap and the results of that is two-fold, they keep on churning the customers amongst themselves. You can see from the numbers that I put up here, they are not really getting our customers. So that if they are showing any growth quarter-to-quarter, half-to-half, it’s because they’re poaching amongst themselves.

And those customers are just not loyal; by definition they are not loyal.  I would say they’re price conscious that will just go with whomever offers them the latest deal and that is not our market.  So yes, we can compete on price and we do compete on price in certain areas, particularly where we want to get high utilization of the fixed network investment, but price is not really the way that we compete.”

64.  If the Plaintiffs appear to focus and market on the alleged superiority of the services sold and provided under the Marks, the Advertisements and the references to their services as being more expensive would not in my view have any detrimental effect on the repute of the Marks, or services sold under and by reference to the Marks.  The Plaintiffs claim that price conscious customers are not their market, and the Advertisements target and aim to draw those customers.  The Plaintiffs sought to distinguish themselves from other players who “basically work on price reduction”, so I see nothing unfair, or dishonest, when these players highlight their reduced prices and seek to compare their reduced prices to the Plaintiffs’.

“Eye” Mark being well known mark

65.  I need only to state briefly that I am prepared to accept that the “eye” Mark is a well-known trade mark within the meaning of s 18 (4) of the Ordinance, in that it was promoted and well known to customers of the Plaintiffs who subscribe to the Plaintiffs’ home telephone line services.  These customers constitute a relevant sector of the public under s 1 (4) of Schedule 2 to the Ordinance. 

66.  However, in view of my findings that the Defendant’s use of the Marks in the Advertisements for comparative advertising do not take unfair advantage of or is detrimental to the repute of the Marks, and constitute use in accordance with honest practices in industrial or commercial matters under s 21, there is no infringement under s 18 (4) of the Ordinance.

Conclusion

67.  Having considered all relevant factors, including the fact that the Defendant’s use of the Marks in the Advertisements does not take unfair advantage of the Marks, is not detrimental to the repute of the Marks, and is not such as to deceive the public, I find that such use is in accordance with honest practices in industrial or commercial matters.  Since a defence under s 21 of the Ordinance is established, I dismiss the Plaintiffs’ claims of infringement made under s 18 of the Ordinance, and order that they should pay to the Defendant the costs of the action, with certificate for 2 counsel.