MGA ENTERTAINMENT LTD v. LINWELL INDUSTRIES LTD

HCA 4023/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4023 OF 2003

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J U D G M E N T

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I. Introduction

1. By a Summons ("the Summons") dated 4 November 2003 the Plaintiff claims the following principal heads of interim relief against the Defendant:-

(1) (Summons §1) An Injunction to restrain the Defendant from manufacturing or dealing with:-

(a) "Fashion Dolls" of the type ("the General Trade type")¹ seized from General Trade SpA ("General Trade") in Italy in about April 2003; and,

(b) "Fashion Dolls" of the 3 types ("the 3 Union Top types")² found inside the false ceiling of the premises of Union Top (HK) Co. Ltd. ("Union Top") in Hong Kong.

(2) (Summons §§2, 3 and 5) An Order that the Defendant within 7 days deliver up to the Plaintiffs for preservation all dolls subject to any Injunction granted by the Court and all packaging, articles, documents, papers and other materials relating to such dolls and their manufacture or trade.

(3) (Summons §4) An Order that the Defendant within 7 days disclose information and documents relating to the suppliers from whom the Defendant has obtained, and the purchasers to whom the Defendant has sold, the "Fashion Dolls" in question.

2. The Defendant denies the Plaintiff is entitled to interlocutory relief, but instead invites the Court to order a speedy trial of the matters in dispute between the parties.

II. Background

3. The Plaintiff is a California-based company. It designs, manufactures and sells toys worldwide. The Plaintiff makes and markets its own toys and toys licensed by third parties. Further, the Plaintiff itself licenses third parties to make and market products, most of which are non-toy items.

4. The Defendant is a Hong Kong company which sells dolls, including "Fashion Dolls" of the 3 Union Top types. The Defendant says that it sources goods from manufacturers or their intermediaries and then sells good so obtained in Hong Kong or elsewhere.

5. This action concerns a line of dolls known as "BRATZ" which have been successfully developed and marketed by the Plaintiff. The BRATZ suite of dolls originally consisted of 4 female characters: Cloe (a Caucasian doll), Yasmin (a Hispanic doll), Sasha (a Black doll) and Jade (an Asian doll). Two more characters, Meygan and Dana, were later added. There are also male dolls in the BRATZ line but this action does not concern them.

6. The Plaintiff says that the BRATZ dolls project "an image of girls with a hip and cool outlook, who are school friends and who love to trade clothes, shoes and other adornments". The Plaintiff identifies the following specific attributes in its female BRATZ dolls:-

(1) Over-sized eyes.

(2) Protrusive mouth.

(3) Diminished nose.

(4) Multi-coloured make-up.

(5) Few and exaggerated eyelashes.

(6) Two-toned lipstick.

(7) Disproportionately large feet and shoes.

(8) Snap-on shoes.

7. The 4 original BRATZ were first sold in America in June 2001. The BRATZ' "Funk 'N' Glow" Collection has been sold in Hong Kong department and chain stores (such as Jusco, Sogo, Citi-Store, Seibu, Seiyu, Toys R Us, Kalm's) from about December 2002. Meygan has since also been introduced here. The launch of BRATZ dolls in Hong Kong has been supported by an extensive advertising campaign. The Plaintiff says that from the outset BRATZ dolls have enjoyed phenomenal success as a toy product worldwide, including here. The Plaintiff claims that this success has in turn meant that there is huge potential for exploiting BRATZ characters in the licensing and merchandising of non-toy goods.

8. The Plaintiff claims the copyright in artistic works relating to the BRATZ dolls. Mr Carter Bryant drew designs for the dolls between 1998 and 2000. Ms Margaret Leahy made wax models of the head, body parts and shoes of the BRATZ dolls in the winter of 2000-1. Ms Jessie Ramirez then made silicon rubber moulds based on Ms Leahy's models. Finally, Ms Anna Rhee and Mr Bryant drew up decoration directions for the various dolls comprising the BRATZ suite and worked on and revised the deco masters for the same in the winter of 2000-1. There is evidence that Mr Bryant, Ms Leahy, Ms Ramirez and Ms Rhee have assigned the intellectual property rights in their respective works to the Plaintiff. Although the Defendant casts doubt on the Plaintiff's ownership of the copyright in the BRATZ dolls, the Plaintiff's claim to such is not something that can be dismissed out of hand in these interlocutory proceedings.

9. In April 2003 a "Fashion Doll" of the General Trade type was spotted in Italy by Ms Emmanuela Silvestri, the Plaintiff's licensing agent there. She referred the matter to Mr Isaac Larian, the Plaintiff's Chief Executive Officer. Mr Larian asked Ms Silvestri to purchase samples for examination. Accordingly, a "Fashion Doll - Hair Styling Playset" and "Fashion Doll Playset" were bought and delivered to the Plaintiff's USA office. The labels to these "Fashion Doll" packages disclosed that they were imported into Italy and marketed in that country by General Trade. The Plaintiff accordingly commenced proceedings in Italy against General Trade.

10. The Plaintiff's action was preceded by an ex parte application for a seizure order against General Trade. Pursuant to that order, documents were seized from General Trade which showed that Union Top had been supplying the relevant "Fashion Dolls" to General Trade.

11. The Plaintiff instructed Kroll Fact Finders Limited ("Kroll") to investigate Union Top in Hong Kong. Although Kroll confirmed that Union Top was trading in toys known as "Fashion Dolls", Kroll could not obtain samples of "Fashion Dolls" of the General Trade type from Union Top. Consequently, the "Fashion Dolls" seized from General Trade being required for the Italian proceedings, the Court has been provided with a videotape showing the type of "Fashion Doll" seized in Italy. Pictures of the relevant doll have also been exhibited to the 1st Affirmation of Mr Lee (managing director of the Plaintiff's Hong Kong subsidiary, MGA (HK) Entertainment Limited) for the purpose of the hearing before me.

12. The Plaintiff initiated HCA No. 3242 of 2003 against Union Top. On 28 August 2003 the Plaintiff obtained an ex parte Anton Piller Order permitting it to enter Union Top's premises. That order was executed on 29 and 30 August 2003. From the material obtained thereby, the Plaintiff learned that the Defendant was supplying "Fashion Dolls" to Union Top. The Plaintiff contends that the "Fashion Dolls" of the 3 Union types were hidden in Union Top's ceiling to avoid detection. The documents seized from Union Top suggested that the Defendant had supplied "Fashion Dolls" to Union Top in at least 7 transactions. Union Top had then on-sold the "Fashion Dolls" supplied to General Trade.

13. The Plaintiff contends that the "Fashion Dolls" of the General Trade type and the 3 Union Top types are "slavish copies" of the BRATZ dolls. The Plaintiff in particular draws the Court's attention to the following features which it alleges are found in the "Fashion Dolls" in question:-

(1) Over-sized heads.

(2) Facial decoration.

(3) Over-sized eyes.

(4) Diminished nose.

(5) Protrusive and defined mouth.

(6) Multi-coloured make-up.

(7) Few and exaggerated eyelashes.

(8) Disproportionately large feet and shoes.

(9) Snap-on shoes.

(10) Two-tone lipstick used in the "Fashion Doll" of the General Trade type.

14. Mr Lee stresses in his 1st Affirmation that:-

"The pattern, style and combination and layers of different colours of the multi-coloured facial decoration or make-up on the 'Fashion Doll' are substantially similar to those of BRATZ. Even the exaggerated eyelashes and two-toned lips in BRATZ are present in the 'Fashion Doll'."

15. In respect of the "Fashion Doll" of the General Trade type in particular, Mr Lee additionally points out:-

"Not only that BRATZ were copied in close resemblance in the 'Fashion Doll', the 5-girls them of the BRATZ girls was also imitated. This is evidenced in the packaging of the 'Fashion Doll' obtained in Italy, as shown in the photographs and the videotape sent by the Italian lawyers. Furthermore, the BRATZ '2002 Fall Limited Edition -- The Funk 'N' Glow Collection' featured a pictorial depiction of the 5 BRATZ girls dancing together both in front and at the back of the packaging of the 'Fashion Doll' sample obtained in Italy. Now produced and shown to me marked 'LSC-20a' is a sample of Cloe in the Funk 'N' Glow Collection packaging and 'LSC-20b' is a sample Sasha in the Funk 'N' Glow Collection packaging. The packaging of the other BRATZ girls in the Funk 'N' Glow Collection was the same. The pictorial depiction was identically copied in the 'Fashion Doll' packaging."

16. The 5-girl motif, in the sense of a pictorial depiction of 5 dolls with differing clothing and decorations, appears on the packaging of 1 of the 3 Union Top types of "Fashion Dolls". The theme also appears on the packaging of other types of "Fashion Doll" in which the Defendant deals. Samples of those other types of "Fashion Dolls" have been provided to the Court as part of Exhibit SN-1 to the Affirmation of Steve Ng Siu Pang ("Mr Ng") filed on behalf of the Defendant. However, the motif as it appears in the single Union Top type sample just mentioned or in the "Fashion Dolls" tendered by Mr Ng, is not an identical copy to that which appears in the BRATZ "Funk 'N' Glow" Collection. Only the packaging of the "Fashion Doll" of the General Trade type obtained from the Italian seizure bears an identical copy of the BRATZ "Funk 'N' Glow" Collection 5-girl drawing.

17. The Defendant denies having any involvement with the sale by General Trade of "Fashion Dolls" in imitation BRATZ 5-girl packaging. The Defendant says that it sold "Fashion Dolls" to Union Top in different packaging from that found in Italy. The Defendant suggests that, having been sold "Fashion Dolls" by the Defendant, either Union Top and General Trade must have re-packaged the "Fashion Dolls" into boxes bearing the copy BRATZ 5-girl drawings. The Defendant cannot be held responsible for such conduct by Union Top or General Trade.

18. More generally, the Defendant claims solely to be a trading company, in no way concerned with the manufacture of dolls. The Defendant says that in March 2002 a Mr Hon Chi Keung of the Fu Lin Toys and Garment Manufacturing Factory ("Fu Lin") in Guangdong offered to sell "Fashion Dolls" to the Defendant for on-sale inside or outside Hong Kong. In November 2002³, Union Top having expressed interest in buying the dolls from the Defendant, the Defendant placed an order for "Fashion Dolls" (among other items) with Fu Lin. The dolls were then supplied to the Defendant by Hui Yang Tong Kong Primary School Polo Toys Factory.

19. The Defendant alleges that it obtained assurances from Fu Lin as to the originality of the "Fashion Dolls" design. The relevant "Fashion Dolls" are said to have been designed by a Chan Chi Leung (Fu Lin's employee) based on the features of Ms Zhao Wei, the star of a Mainland television series called "Princess Pearl". The Defendant draws attention to the following distinctions between its "Fashion Dolls" and the Plaintiff's BRATZ dolls:-

(1) The sizes of the dolls are different.

(2) The body shapes of the dolls are different.

(3) The sizes and shapes of the dolls' heads are different.

(4) The eyelashes and eyelines of the dolls are different.

(5) The shapes and colours of the eyes in the dolls are different.

(6) "Fashion Dolls" do not have facial decoration.

(7) The shapes of the dolls' lips and their lipstick colours are different.

20. In her Affirmation for the Defendant, Ms Wong continues:-

"I believe the essence of the complaint made by MGA [the Plaintiff] is that the Dolls are a reproduction for the area around the eyes and in relation to that aspect I comment as follows. The area around the eyes is small in terms of quality and quantity and even if, which is denied, they had been used as the basis for the Dolls manufactured for my Company, this would not amount to substantial copying. I verily believe that what MGA is trying to do is to protect the mere idea and prevent any trader or manufacturer from colouring the eyes and area around the eyes of their dolls...."

The notion that the Plaintiff is in effect attempting to claim copyright in a "general idea" embodied by the BRATZ dolls has featured prominently in Mr Stephenson's submissions before me on the Defendant's behalf.

21. The Plaintiff hotly disputes the Defendant's case. Mr Liao (appearing for the Plaintiff) contends that the prominent features identified above in relation to the BRATZ suite have been collectively incorporated by the Defendant in the "Fashion Doll". Mr Liao observes:-

"The Plaintiff does not say that each of these features was exclusive to BRATZ. Some other dolls in the market may possess one or more of these attributes. But there are no dolls in the market, other than some infringing dolls, which possess all these attributes in aggregate and which altogether resemble BRATZ."

Moreover, Mr Liao is critical of the Defendant's suggestion that Union Top or General Trade had re-packaged the "Fashion Dolls" of the General trade type. Mr Liao argues that the story is implausible and the evidence (especially instructions from Union Top to the Defendant on the inclusion of "CE" and bar code labels on boxes used by the Defendant for the supply of "Fashion Dolls" to Union Top) implies that the packaging found in Italy was likely the Defendant's handiwork.

III. Discussion

22. The Plaintiff's writ claims against the Defendant for copyright infringement and passing off. But, for the purpose of the Summons before me, the Plaintiff relies on copyright alone. Further, the Plaintiff alleges that the Defendant not only trades in the "Fashion Dolls", but manufactures them as well. It is the Plaintiff's contention then that the Defendant is both a primary and secondary infringer. However, for the purposes of the present hearing, the Defendant acknowledges that the currently available evidence only establishes that the goods are manufactured in the Mainland. Thus, for the purpose of the Summons, the Plaintiff restricts its case to one of secondary infringement.

23. Lord Millett summarised the Court's approach in assessing whether there has been an infringement of copyright as follows in Designers Guild Ltd. v Russell Williams (Textiles) Ltd. [2001] FSR 113 (HL), at 124-5 (§§39-41):-

"The first step in an action for infringement of artistic copyright is to identify those features of the defendant's design which the plaintiff alleges have been copied from the copyright work. The court undertakes a visual comparison of the two designs, noting the similarities and the differences. The purpose of the examination is not to see whether the overall appearance of the two designs is similar, but to judge whether the particular similarities relied on are sufficiently close, numerous or extensive to be more likely to be the result of copying than of coincidence. It is at this stage that similarities may be disregarded because they are commonplace, unoriginal or consist of general ideas. If the plaintiff demonstrates sufficient similarity, not in the work as a whole but in the features which he alleges have been copied, and establishes that the defendant had prior access to the copyright work, the burden passes to the defendant to satisfy the judge that, despite the similarities, they did not result from copying.

Even at this stage, therefore, the inquiry is directed to the similarities rather than the differences. This is not to say that the differences are unimportant. They may indicate an independent source and rebut any inference of copying, but differences in the overall appearance of the two works due to the presence of features of the defendant's work about which no complaint is made are not material....

Once the judge has found that the defendants' design incorporates features taken from the copyright work, the question is whether what has been taken constitutes all or a substantial part of the copyright work. This is a matter of impression, for whether the part taken is substantial must be determined by its quality rather than its quantity. It depends upon its importance to the copyright work. It does not depend upon its importance to the defendants' work, as I have already pointed out. The pirated part is considered on its own (see Ladbroke (Football) Ltd. v William Hill (Football) Ltd. [1964] 1 WLR 273 at 293 per Lord Pearce) and its importance to the copyright work assessed. There is no need to look at the infringing work for this purpose."

24. On visual inspection of the "Fashion Dolls" of the General Trade and 3 Union Top types, I am satisfied that there is an arguable case that:-

(1) features identified by the Plaintiff have been incorporated in the Defendant's dolls; and,

(2) such features qualitatively constitute a significant part of the Plaintiff's dolls.

25. My view that features highlighted by the Plaintiff have been incorporated in the Defendant's "Fashion Dolls" should not be taken to mean that all the "Fashion Dolls" exhibited to this Court incorporate such features to the same degree. Some "Fashion Dolls" exhibit more of the Plaintiff's highlighted features than others.

26. Thus, Exhibit LSC-18a (a "Fashion Doll" of the 3 Union Top types) does not seem to have the following features:-

(1) Diminished nose.

(2) Multi-coloured make-up.

(3) Disproportionately large feet and shoes.

(4) Snap-on shoes.

(5) Two-tone lipstick.

I note that the 5-girl motif is absent from the packaging of Exhibit LSC-18a.

27. To take another example, Exhibit LSC-18b (a "Fashion Doll" of the 3 Union Top types), the following features do not seem to be present:-

(1) Over-sized head.

(2) Multi-coloured make-up.

(3) Snap-on shoes (that is, the doll's shoes seem to be over-size but do not seem to be snap-on).

(4) Two-tone lipstick.

The 5-girl motif is present on the packaging, but is not an identical copy of the 5-girl them on BRATZ "Funk 'N' Glow" Collection boxes.

28. Nonetheless, in my judgment, the "Fashion Dolls" which are the subject of this action all exhibit features of BRATZ dolls to an extent which is arguably substantial. It is for that reason that I believe the Plaintiff has raised a serious question in respect of each "Fashion Doll" in question.

29. I am mindful of Mr Stephenson's submission that the BRATZ doll features which Mr Liao has focused on are merely "general ideas". But I do not think that in interlocutory proceedings I can exclude a real (as opposed to merely fanciful) possibility of the Plaintiff convincing the trial judge that the features are not merely details which are "commonplace, unoriginal or consist of general ideas".

30. I am strengthened in my conclusion by 2 matters. First, in the course of his submissions, I asked Mr Stephenson whether he went so far as to say that the Plaintiff's case on copyright infringement was unarguable. Mr Stephenson did not go so far as to say that the Plaintiff's case was hopeless. He characterised Mr Liao's case as "not strongly arguable". In his answer, Mr Stephenson appears to me to concede that the Plaintiff has the kernel of an arguable case. Second, in requesting that there should be a speedy trial, I take Mr Stephenson to be implicitly submitting that the Plaintiff's case is at least triable as a serious question which cannot be disposed off summarily in an interlocutory hearing.

31. Mr Stephenson submitted that the Defendant's dealings in "Fashion Dolls" were "out of Hong Kong, arranging supplies from China to Italy and elsewhere". But, insofar as the Defendant is a Hong Kong company which admittedly sold "Fashion Dolls" to Union Top (another Hong Kong company), it seems entirely arguable that the Defendant dealt with the relevant dolls in Hong Kong contrary to the terms of Copyright Ordinance (Cap. 528).

32. In respect of responsibility for the packaging of the "Fashion Dolls" of the General Trade type, there is clearly a serious dispute between the parties which can only be resolved with the help of cross-examination. While (like Mr Liao) I find the Defendant's explanation of "re-packaging" odd, I cannot now say with confidence that the Defendant's case on the point is wholly incredible or incapable of belief. Assessment of the issue must await trial.

33. The Plaintiff having (to my mind) raised a serious triable question on the issue of copyright infringement, the question is whether the balance of convenience calls for the grant of interim relief.

34. The 1st limb of the American Cyanamid balance of convenience test requires the Court to evaluate whether the Plaintiff can be adequately compensated by damages if an interim injunction is refused.

35. Mr Liao submitted that the Plaintiff could not be so compensated by reason of matters mentioned by Mr Lee in his 1st Affirmation at §§44-53. Those paragraphs state as follows:-

"44. As already adverted to hereinabove, an important revenue stream of BRATZ are licence fees. The demand and price of BRATZ licences depend on the exclusivity and popularity of the BRATZ products.

45. BRATZ is popular because of its unique funky and sassy image. I have explained the unique facial features of the BRATZ dolls. The 'Fashion Doll' has copied BRATZ' image and appearance, in particular the eyes and the lips, and this will dilute the exclusivity and affect the image of the BRATZ dolls.

46. The Plaintiff has spent multi-million dollars for the worldwide protection of BRATZ and its image. The continuous sale of cheap imitations will no doubt affect the demand for licences and the level of fees. Any damage to the 'BRATZ' and its reputation and image, dilution in exclusivity and diminution in the value of BRATZ is a loss which cannot be measured in money and cannot be adequately compensated by damages. Once the reputation of BRATZ is ruined, it is difficult if not impossible to re-build it.

47. There have already been complaints to the Plaintiff from its distributors concerning the influx of cheap imitations of BRATZ in the world market. I do not mean to suggest that the Defendant solely contributed to this phenomenon, as there were other infringers. Nevertheless, the continuous sales of cheap imitations, including the 'Fashion Doll', would no doubt adversely affect the sales of BRATZ. The distributors of BRATZ are very concerned with the status of BRATZ protection, particularly when the knock offs are severely undercutting the BRATZ dolls. From the documents, it can be seen that the Defendant's 'Fashion Doll' were sold to Union Top at the units price of HK$7.50, HK$7.80 and HK$9.50 respectively while the BRATZ dolls sell at US$10.66 per piece.

48. This is now produced and shown to me marked exhibit 'LCS-22' being the copy letter issued by Giochi Preziosi SpA, the sole distributor of Bratz dolls in Italy, to the Plaintiff dated 29th October 2003 in which Giochi Preziosi SpA has expressed its serious concern about the infringement of 'Fashion Dolls'. Thus, the appearance in market of infringing copies such as the 'Fashion Doll' have caused much concern. If the Defendant is not stopped in its track, the sales and business of distributors will be adversely affected and the interest in BRATZ will gradually diminish. It will also deal a severe blow to the Plaintiff's business relationship with the distributors and its bargaining power vis-a-vis the distributors. Two of the Plaintiff's exclusive distributors, the Bandai group of companies and the Hasbro group of companies, are the largest toy companies in the world. The Plaintiff cannot afford to maintain a weaker bargaining position with them by reason of the appearance of cheap imitations which will affect the marketability and the value of the BRATZ dolls. This will in turn affect the terms of the distributorship when they come up for renewal. These are important factors which would ultimately lead to commercial and financial losses to the Plaintiff and such losses are irreparable and unquantifiable.

49. The targeted consumers of BRATZ dolls are girls aged between 4 and 14 years old. They may not all be savvy or mature enough to notice the 'Fashion Doll' is not the Plaintiff's product. Many customers may have mistakenly thought the 'Fashion Doll' is in fact a BRATZ doll or an addition to the BRATZ line. It would be a matter of conjecture as to how many sales of BRATZ dolls would have been made were it not for the Defendant's unlawful activities. It would be difficult, if not impossible, for the Plaintiff to show any diminution in projected sales attributable to the 'Fashion Doll' in the market.

50. Since toy safety laws in the USA are very stringent, MGAHK, the licensed manufacturer, has to conduct many safety, reliability and drop tests on the BRATZ products. The EU standards are also quite high. We do not know whether the 'Fashion Doll' was submitted to any of these tests to comply with overseas legislation or regulation. Although there is at present no evidence to show that the 'Fashion Doll' is available for sale in the USA, this does not stop North American customers [from] purchasing them through the Internet. We know already that the Defendant's 'Fashion Doll' has reached Italy and there might well be other markets in Europe or indeed the world that the Defendant;s products have infiltrated. Due to the similarities between the 'Fashion Doll' and BRATZ, any accident caused by product defects may falsely be attributed to BRATZ and the Plaintiff. This damage to reputation, especially to a relatively new product with long-term potential such as BRATZ, is unquantifiable and irreparable.

51. I crave leave to refer to exhibit 'LSC-23' the latest annual return of the Defendant. The Defendant has a paid up capital of HK$10,000. Other than this, the Defendant's financial ability is not known. The directors and shareholders of the Defendant are apparently two women having similar names, which suggest that they might be related, and declaring the same address in Tuen Mun, New Territories.

52. As pointed out earlier, the Plaintiff is a company doing business in a substantial way and is an internationally reputable company. The aggregate turnovers of the Plaintiff's group of companies worldwide in the year 2002 was US$25 million and in the year up to August 2003 was US$37 million. MGAHK's turnovers for the year 2002 were over US$12 million and for the year up to August 2003 were over US$210 million. MGAHK's profits for the year 2002 was over US$488,000.00 and for the year made up to August 2003 was US$25,205,880.00. It has currently retained profits of over US$21,000,000.00. The accounts of MGAHK for the year 2002 have been audited. I have consulted Mr Isaac Larian, Chief Executive Officer of the Plaintiff and a director of MGAHK, who has confirmed to me that the Plaintiff is able and willing to honour its cross-undertaking in damages to this Honourable Court for the grant of interim injunction prayed for.

53. It is essential that an interim restraining order should be granted as soon as possible. In order to stop the infringement and the entailing damage, it is important that the infringement must be stopped at source."

36. The letter dated 29 October 2003 from Giochi Preziosi SpA's Managing Director (Mr Dario Bertè) mentioned by Mr Lee reads as follows:-

"	Dear Messrs
	MGA Entertainment Inc.
	North Hills
	California (USA)

Dear Sirs,

in our condition of exclusive distributor of Your Bratz lines in Italy, San Marino, Vatican City and Canton Ticino, we would like to let You know what follows.

We heard about Your action towards the Italian company General Trade, regarding the Bratz knock-off called 'Fashion Dolls'.

Such a knock-off surely caused damages to us, although, as for now, we're not able to quantify them exactly. It has not only caused damage to the reputation fo the Bratz dolls, but also to our reputation as Bratz's distributor, as resulting from difficulty in obtaining orders from retail outlets, and it has also caused damage to our relationship with our customers.

Anyway, we totally agree with the above action, that is a necessary measure to protect Your products, avoiding the diffusion of copies and preventing unfair competition acts which would furtherly damage both Your interests and ours.

Although we are confident that You will address this issue adequately, please note that we shall be glad to assist You in protecting Your intellectual property's rights as manufacturers, while, in the same time, ensuring that our legitimate rights as exclusive distributor for Italy are preserved.

Best regards."

37. I have doubts as to the weight which I can attach to the above evidence of Mr Lee.

38. First, it seems to me that Lee §§49 and 50 must be discounted. The former paragraph alleges that consumers may mistake "Fashion Dolls" for BRATZ ones. That possibility concerns the passing-off of "Fashion Dolls" as BRATZ dolls. The damages which might ensue from such passing-off are not relevant to the present proceedings. Mr Liao has expressly limited his attack before me to copyright infringement. The latter paragraph raises issues on which, by Mr Lee's own admission, there is no evidence before the Court. Mr Lee is simply speculating that "Fashion Dolls" may be unsafe under US or EU regulations or that the dolls may be purchased by North American consumers via the internet. I cannot base my decision on mere hypothesis.

39. Second, I am not any more impressed by the letter from Giochi Preziosi exhibited to Lee §48. The motivation behind the letter is difficult to fathom. It appears to me that Giochi Preziosi may have written the letter at the Plaintiff's request to serve as "evidence" in the present proceedings. Given there is a close relationship between Giochi Preziosi and the Plaintiff, the Court should scrutinise the contents of the letter carefully. It seems to me that the letter consists of little more than assertion without citation of hard fact or detailed explanation that unquantifiable damage has been suffered. I am therefore unable to attach any weight to Giochi Preziosi's unsupported statements.

40. Third, I do not think that Lee §47 assists the Plaintiff's case on unquantifiability of damages. Mr Lee essentially argues that consumers are likely to buy the cheaper "Fashion Dolls" rather than the more expensive BRATZ ones. This would adversely affect BRATZ sales. But in such situation BRATZ' lost sales should be capable of quantification. For instance, there should be no difficulty in principle in calculating the Plaintiff's damages based on the total number of infringing "Fashion Dolls" sold by the Defendant or the profit made by the Defendant from the sale of infringing "Fashion Dolls".

41. Fourth, the thrust of Lee §45 is unclear. I do not understand how the mere fact that the 'Fashion Doll' has copied the eyes and lips of BRATZ dolls "will dilute the exclusivity and affect the image of the BRATZ dolls". Precisely, how will "exclusivity" be diluted and image affected? No detailed explanation is provided by Mr Lee. On exclusivity, see further below.

42. Fifth, the crux of the Plaintiff's case on unquantifiability of damages is therefore found in Lee §§44 and 46. The complaint in those paragraphs is that the demand for BRATZ licences and the level of royalty or other fees which the Plaintiff can negotiate will be adversely affected. Exclusivity will be impaired.

43. In San-X Company Limited v Tai Pan Bread & Cakes Company Limited and another HCA No. 78 of 2002, 11 April 2002 (affirmed in Civil Appeal No. 219 of 2002, 30 October 2002) I held that, although lost royalty payable by Tai Pan would be capable of quantification, damages resulting from the loss of exclusivity and deterrence of licensees consequential on any potential infringement by Tai Pan of San-X' copyright in its "Kogepan" characters would not be. However, that conclusion was based on specific evidence on the exclusivity of the licensing market for San-X' "Kogepan" characters. The situation in San-X is to be contrasted with that here, where no hard particulars have been provided as to the exclusive nature of the licensing market associated with BRATZ characters and as to the likely threat to that exclusivity arising out of any infringement by the Defendant's "Fashion Dolls".

44. The evidence on the Plaintiff's business of licensing the use of BRATZ characters in order to sell other products is found in §§24-26 of Mr Lee's 1st Affirmation.

45. Lee §24 refers to the Plaintiff having entered into 120 merchandise licence agreements for a wide range of products: "paper napkins, girls clothing, jewelry, bedding, home furnishing, stationery, toiletries, video games, footwear and electrical appliances etc." This is an eclectic mix of products. There is nothing in the list provided to suggest that the BRATZ character is exclusive in the sense of being confined to the marketing of luxury products which the consumer associates with a discriminating, refined or financially successful lifestyle.

46. Lee §25 mentions that BRATZ brand goods are marketed all over the world and bring in revenues of US$12 million. Given that scale of magnitude, without further explanation, I have doubts whether the Defendant's operation (which seem to be relatively minor in comparison) can significantly affect any exclusivity or marketability associated with the BRATZ name.

47. Lee §26 states that the Plaintiff has granted exclusive rights for the distribution of BRATZ dolls to Bandai UK Ld. in the UK, Hasbro SA in the Benelux and Giochi Preziosi in Italy. There is little (if any) evidence that "Fashion Dolls" have been marketed extensively or at all in the UK or the Benelux. Further, as I have noted above, the evidence from Giochi Preziosi needs to be addressed with care. Even then, it is not clear how the mere fact that exclusive distributorships have been granted translates into the existence of an unquantifiable threat of damage to the exclusive image which the Plaintiff wishes to have associated with BRATZ dolls. Lee §46, for instance, which appears directed towards answering this question consists of little more than assertion and supposition.

48. Accordingly, the Plaintiff has not shown sufficient evidential basis for me to conclude that it would suffer loss which cannot be compensated in damages if an interim injunction was refused.

49. Lee §51 points out that the Defendant only has a paid-up capital of $10,000. But I do not think that fact alone would justify me in finding that the Defendant was not in a position to pay such damages as the Plaintiff might be found to have suffered from any infringement by the Defendant (as opposed to any other infringers of the Plaintiff's copyright). Indeed, there is some inconsistency in the Plaintiff's case in this respect. In his Skeleton §44, Mr Liao suggests that the impact of the injunction sought on the Defendant's business is likely to be "minimal". That submission implies that, in the Plaintiff's view, the Defendant has significant business other than the trade in "Fashion Dolls". If so, on the basis of its income from such trade, why would the Defendant be unable to compensate the Plaintiff for any quantifiable damages arising from infringement?

50. On the whole, I conclude then that the Plaintiff has failed to establish the 1st limb of the American Cyanamid balance of convenience test and an injunction should be refused.

51. I do not propose to go into the other limbs of American Cyanamid since that is unnecessary. Nonetheless, I would comment briefly on whether the copying of the 5-girl motif on the "Fashion Dolls" packages seized from General Trade should be treated as a special factor in weighing up whether to grant an injunction. I doubt that such factor can be of decisive on the grant of an injunction here. The Defendant denies being involved in the direct copying of the motif in the packaging obtained from General Trade. The Defendant may be right or wrong in that denial. However, there would be little point in enjoining the identical copying of the BRATZ 5-girl motif on "Fashion Dolls" packaging where the Defendant says it has never done so and disavows any intention of ever doing so.

52. Although I refuse an injunction at this stage, I believe that it makes sense to have a speedy trial to enable the parties to know where they stand as soon as possible. Mr Liao was not averse to Mr Stephenson's suggestion of a speedy trial. The parties differed only as to the appropriate timetable for a speedy trial. For now, I propose simply to direct that there be a speedy trial and to invite the parties to agree a timetable between themselves. If no agreement can be reached on timing, the present summons can be restored before me (possibly at the same time as the impending hearing on the Defendant's application for security for costs) for further directions.

IV. Conclusion

53. The reliefs sought in Summons §§1-5 are refused. I note that, even if I had been prepared to grant the injunction sought by Summons §1, I would still have refused the ancillary relief sought by Summons §§2-5. Pending trial of this matter, it seems to me premature to order delivery up of "Fashion Dolls" and disclosure in relation to the Defendant's suppliers and customers.

54. I direct that there be a speedy trial of the action. The parties have liberty to apply to restore the Summons for directions on the holding of a speedy trial.

55. The Defendant has substantially prevailed. I make an Order Nisi that the Defendant is to have the costs of the Summons, save that the Defendant is to bear the costs of and occasioned by the Affidavit of Raul Eduardo Narvaez Wong dated 23 December 2003 and the Affirmation of Steve Ng Siu Pang dated 9 January 2004. Mr Ng's affirmation was a corrective one, which was filed late. I did not see the relevance of the Spanish proceedings to which Mr Raul Wong referred in his affidavit. On their face, the Spanish proceedings concerned the Defendant's WENDY dolls and not "Fashion Dolls". WENDY dolls are not the subject of the Summons or this action. In the circumstances, it would not be right for the Plaintiff to bear the costs of that affidavit. Costs are to be taxed if not agreed and to be in any event.