PRO TAIFONG CO LTD AND ANOTHER v. WINSON DEVELOPMENT CO (a firm)

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MP 1758 & HCA A3909 of 1990

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BETWEEN

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JUDGMENT

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1. This is an application by the Defendants for the discharge of an injunction granted by Nazareth J. on the 14th June this year and continued by him on the 21st June in the absence of the Defendants due to a failure to inform them as required by the injunction of the terms and effect of the order initially served. Nothing now turns on the Defendants absence nor on the Plaintiff's breach of that particular undertaking.

2. The Plaintiffs manufacture and sell a triangular marker pen and they registered their design on the 6th January 1990. Nazareth J.'s order restrains the Defendants from manufacturing, selling, supplying etc. items of the type exhibited to an affirmation of Liu Ming Yueh namely the Plaintiff's triangular marker pen. The claim as made in the writ is based on infringement of the Plaintiffs registered design and is also based on passing off. No statement of claim has yet been served.

3. Mr. Pao for the Defendants seeks the discharge of this order on the ground that the Plaintiff's evidence shows no serious question to be tried. In other words, the Plaintiffs fail at the very first Cyanimid hurdle. Although the Defendant's affirmations refer to material non-disclosure on analysis this is no more than an assertion that the Plaintiffs should have disclosed to Nazareth J. that they did not have a case, the very thing of course, the Plaintiffs have been maintaining all along namely that they do have a case. So the sole issue before me is whether the Plaintiffs have satisfied me that there is a serious issue to be tried. Mr. Mitchell for the Plaintiffs says that his claim is not frivolous or vexatious. There is a serious question to be tried and that I cannot resolve disputed issues of fact on affidavit and the matter must go to trial and that the Plaintiffs should in the meantime be protected by an injunction because damages are not a suitable remedy.

4. Mr. Pao says that there is no issue to be tried because the Plaintiffs registered design is invalid by reason of prior publication. He reminds me that the Registered Design Act has been extended to Hong Kong by order in Council and s.1(2) of that Act states that no design should be registered which is:

 

"the same as a design which before the date of the application for registration has been registered or published in the UK (read HK) ..." [my emphasis]

5. He referred me to Russell Clarke on Copyright in Industrial design (1974) for the proposition that publication can be of 2 types. Firstly, in prior documents or secondly by prior use.

6. He then referred me to Mr. Chang's affirmation on behalf of the Defendants in particular paras 4-8 and pointed out that I could find there evidence of prior publication as would satisfy me that the Plaintiffs had no case whatsoever. Mr. Chang says in para. 4 of this affirmation that a company called DJL has marketed a triangular marker pen in HK since early 1987. A pamphlet is then produced and Mr. Chang says the marker pen is of similar shape. Mr. Hu for the Plaintiff says in his affirmation made on 22 August 1990 that the DJL pen is different in shape, it being diamond shaped with sloping sides whereas the Plaintiff's is flat. Me produces a pamphlet. I am not satisfied on the material before me that the DJL product is the same shape as the Plaintiffs and thus I find no prior publication on this score. I remark at this point that this does illustrate (as does another example in a moment) of the danger of acting on assertions in affidavits or affirmations because when they are investigated various statements prove not to be wholly accurate. It is said that this is a similar shape to the Plaintiffs marker pen. It clearly is a different shape because it is diamond shaped. I make no criticism of Mr. Chang about this but it just underscores the difficulty of resolving issues like this on affidavit evidence without actually seeing the other article.

7. Next Mr. Chang says in his affirmation that a company called New Town King had in April 1988, made available in Hong Kong its version of a tri-marker pen. He then produces a Japanese magazine which shows this pen and he says the magazine was circulated in Hong Kong at about that time. He then produces a pamphlet and invoice showing in October 1988, a sale of a tri-marker pen to a Hong Kong company called Faith and Grace.

8. Mr. Hu retorts that the magazine is Japanese and is prima facie for sale in Japan. He says the general catalogues produced could have been obtained from a trade exhibitor or exhibition in Taiwan. New Town King is Taiwanese. Mr. Hu has never heard of either of these companies and Mr. Mitchell further questions whether in fact the Japanese brochure was circulated in Hong Kong given its language. I am not satisfied that this evidence shows prior publication to such an extent that the Plaintiffs have no serious issue to be tried. This aspect of the matter can only be resolved after a trial and I cannot decide this on affidavit evidence at this stage.

9. In para. 8 Mr. Chang exhibits 2 promotional pamphlets distributed so he says by the Plaintiffs. He says they were available in Hong Kong, he believes, in 1988.

10. Mr. Hu dismisses this point quite simply by saying that these 2 pamphlets were used by the Plaintiffs for their exhibition in Taiwan and that they were never distributed in Hong Kong. This, again, shows how dangerous it is for the Defendants to rely on certain documents as proving prior publication in Hong Kong without knowing the true background to them. There is nothing in this point to satisfy me that prior publication has taken place in Hong Kong.

11. In para. 7 Mr. Chang refers to a company called GWS Trading and says that they had such a pen available in Hong Kong in early 1988. He produces an undated pamphlet. Mr. Pao says that this shows quite clearly that this product was in the public domain before the Plaintiffs registered their design in January, this year.

12. Mr. Hu retorts that he has never heard of GWS and goes on to say that all markers referred to in Mr. Chang's affirmation paras. 4-8 are all copies of the Plaintiffs product. Mr. Mitchell expresses surprise there is no evidence from GWS any more than there is from the other companies referred to in Mr. Chang's affirmation.

13. It seems to me that as far as GWS is concerned, it would be dangerous to conclude that this was clear evidence of prior publication on the basis of this affidavit evidence containing, quite properly, hearsay evidence. Mr. Chang's conclusions have been shown to be erroneous on a prima facie basis with regard to his para. 8 with which I have just dealt. This is an issue which will have to be resolved after an oral hearing and of course after discovery.

14. Finally Mr. Chang says in para. 5 that in early 1988 Pollyflame Concept (HK) Ltd has made available to the Hong Kong market a marker pen which was the same as the Plaintiffs. He produces the relevant pages of a catalogue for 1988 of Pollyflame's parent based in Europe. He says this was distributed in Hong Kong by the subsidiary and it has been in the Defendant's possession since about the middle of 1988.

15. Mr. Hu says that Pollyflame International is a customer of the Plaintiffs and it only sells in Europe. He says the company does have a branch in Hong Kong but it has never sold these markers in Hong Kong.

16. Mr. Pao says on this point there is no denial that the 1988 catalogue was available in Hong Kong and that there is clear evidence of prior publication by documents. Mr. Mitchell whilst regretting his evidence did not go far enough on this point, says, in effect, that it would be strange to distribute a catalogue in Hong Kong when the parent only sells in Europe.

17. I must confess to having found this aspect to the case more difficult than the others and do see some prima facie attraction in Mr. Pao's submission. However, after careful thought and consideration I am not prepared to hold that this part of the case shows that there is no serious issue to be tried. The Plaintiff's case in my judgment is not frivolous or vexatious. I am very loath to decide the issue of prior publication on affidavit evidence alone as we have seen that there is scope for genuine error and misapprehension. This does not mean that I have concluded that the Plaintiffs have a strong case. I make no findings or comments in relation to the strength or weaknesses of either party's case. However, once the Plaintiffs have satisfied me as to the threshold of serious issue to be tried, I do not have to go into the respective strengths and weaknesses of the case unless the balance is so evenly held that I must look for something to tilt it. I will return to the question of balance of convenience shortly.

18. Finally on the facts I have to deal with paras. 9-12 of Mr. Chang's evidence. He says that in early 1988, so he has been told by Mr. Hui of Tung Yik (manufacturer of the Defendant's product), Mr. Hui was given a tri-marker pen by a customer with a view to having it manufactured. Sketches and drawings were prepared and Mr. Chang believes production commenced shortly thereafter. The product was then tested at a Hong Kong fair in 1988. The Defendants then received orders and have sold apparently half a million or more and have 50,000 ready to be delivered or certainly did at the time the injunction was served on them. Mr. Hu says that the marker pen given to Hui was probably the Plaintiffs. He says the drawings were based on the Plaintiff's product. Mr. Mitchell commented that it was strange indeed that not one of these markers had been exhibited. It was true he said, as can be seen from the evidence, that the Plaintiffs made an attempt to legitimize the situation but negotiations fell through. Mr. Hu visited Tung Yik once in January 1989. He saw a sample but none were being manufactured. He says the sample was poor and inferior to the Plaintiffs. If Mr. Hu gave a sample to Mr. Chang during the course of their discussions that led to nothing this would be covered by a cloak of confidentiality which would not, in my judgment, amount to prior publication.

19. If seems to me that clearly an issue arises as to whether these products are the same design. Mr. Mitchell says they are not and Mr. Pao says construction is irrelevant when considering design. It is accepted by the Plaintiffs that they knew the Defendants had moulds because they saw the sample and reference is in fact made to the moulds in one of the draft agreements exhibited which was never in fact entered into. I cannot hold at this stage that the 2 products are the same without even having seen the Defendant's product exhibited.

20. Although the Defendants may at trial succeed on the issue of prior publication, I cannot say that on the evidence before me the Plaintiffs do not have a serious issue to be tried. I cannot ignore the fact that there is a raging dispute on the facts which it is impossible for me to resolve at this stage.

21. As to the passing off aspect of the case Mr. Pao relies on the recent decision of Liu J. in Plastimoda in v. Yee Hop 1989 A7662, 21 April 1990. Mr. Mitchell says that in the present case there is more than a bold assertion of reputation being affected because there is the evidence on affidavit that certain customers have complained to the Plaintiffs about their products when in fact they had bought the Defendant's product, in other words, they were complaining about quality, thinking they had bought the Plaintiff's pen when in fact they had bought the Defendants. This is all very interesting but as I have decided that there is a serious issue to be tried on the claim based on registered design I need not go into the additional cause of action based on passing off. It does seem to me that there is a serious issue to be tried on that as well. I now turn to the question of the balance of convenience.

22. I am not satisfied having given this matter very careful thought that damages would be an adequate remedy bearing in mind the evidence of complaints to which I have just referred. As to the undertaking in damages, the 1st Plaintiff is substantial and its accounts show assets of US$2.3m. It is true to say that I have only seen the figures as I have not seen the legend against the figures which were not translated. The 2nd Plaintiff is a Hong Kong company. There is evidence before the court that about half a million dollars has been accumulated in Hong Kong rather than remitting it to Taiwan to the parent. This is for the express purpose of the undertaking in damages. I should say that there was affidavit evidence saying this was going to be done but I do not recall seeing any document which shows that sum in any way on deposit but there is no reason to believe it has not been done. However, subject to a guarantee or other fortification from the 1st Plaintiff because I do not see why the Defendants should have to chase any damages to which they may become entitled in Taiwan. I am satisfied that the Defendants will be well protected by the undertaking in damages. Of course, we are only dealing here with the one product and that is all the injunction refers to. There is no suggestion at all that the Defendants would not be good for any damages awarded against them. So on that score, the 2 points tend to cancel themselves out.

23. My conclusion on the balance of convenience is that in the exercise of my discretion the Plaintiffs should continue to be protected by the injunction because I do feel that damages will not be an adequate remedy if the Plaintiffs win this action. I believe that there is a real risk that they may suffer irreparable harm. The balance thus falls in favour of continuing the injunction which has, of course, been in force since mid-June and I therefore dismiss this application to discharge the injunction.

24. I will now hear Counsel on the question of the undertaking in damages.