XCHRX PROMOTEC GMBH v. SAN-BAN INTERNATIONAL LTD.

HCA 3408/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3408 OF 2001

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R E A S O N S F O R D E C I S I O N

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1. At the end of an inter-partes hearing on 3 August 2001, I granted an interim injunction order in essence restraining the defendant from infringing the plaintiff's copyright in watches. I disagreed with the grounds of objection raised by defence counsel at that hearing. These objections and the reasons why I disagreed with them are summarised below.

2. At least for the purpose of the said hearing, it is undisputed that:

(a) the plaintiff is and was the owner of the copyright in the design of the watches (the subject matter of this action);

(b) prior to 22 June 2001, the defendant was permitted by the plaintiff to manufacture and sell the said watches pursuant to a royalty or licence agreement;

(c) the defendant was obliged to account to the plaintiff the volume of such manufacture and sale, and to pay to the plaintiff the royalties or licence fee for the same;

(d) the said agreement was terminated latest by 3 July 2001.

3. The defendant's first objection is that this action is not in truth concerned with the protection of the plaintiff's copyright, but merely with a complaint that the defendant has understated the quantity of the defendant's sale of watches (and the royalties or licence fee payable as a result). I do not see how the two matters can be separated. The only reason why the defendant was permitted to manufacture and sell the watches was because of the royalty or licence agreement. Once the agreement has been terminated, the defendant is no longer entitled to make use of the plaintiff's copyright work.

4. I disagree with the defendant's second objection that damages would be an adequate remedy. Prior to the inter-partes hearing, the plaintiff applied on an ex-parte basis for, and was granted, an Anton Piller order on 27 July 2001. That order was executed on the defendant's premises on 30 July 2001. Two matters referred to in the affirmations of the executing solicitors are relevant to this aspect:

(a) when the plaintiff executed the order of 27 July 2001, a staff of the defendant removed a sign board bearing the defendant's name from the defendant's premises and uttered words to the effect that the defendant was no longer in the premises;

(b) the executing solicitors saw the plaintiff's watches still displayed in the show window of the defendant's premises.

5. Bearing these matters in mind, I find that the plaintiff is justified in contending that there is a real threat that the defendant may continue to manufacture and sell the plaintiff's watches despite the termination of the royalty or licence agreement. It is also possible that the defendant may not volunteer details of any such act(s) if no interim injunction order was granted.

6. The defendant's third objection is that there was a delay (since about 14 June 2001) before the plaintiff makes the application on 30 July 2001. The plaintiff is an overseas company and more time must have been needed for preparation work to be undertaken before the commencement of this action. For this reason, I do not find that the delay is sufficient to warrant a refusal of the interim order sought by the plaintiff.

7. The defendant also argued that the plaintiff's undertaking as to damages has not been adequately fortified. The defendant has chosen not to file any evidence in opposition at the inter-partes hearing. There is, therefore, no material before me which disputed the plaintiff's claim in this action. It is common for foreign plaintiffs to be required to fortify their undertaking as to damages but, for the above reason, I consider this to be one of the exceptional cases. In fact, according to the plaintiff's evidence, there is at least an prima facie case that the defendant has breached the royalty or licence agreement by not fully disclosing the quantity of watches actually manufactured and sold.

8. The last matter raised by the defendant is the need to continue its performance of an agreement reached with its US buyer (evidenced by an invoice dated 25 May 2001). The plaintiff indicated at the hearing that it is prepared (on an entirely without prejudice basis) to permit the defendant to complete this agreement. I do not regard the conditions proposed by the plaintiff for giving such permission to be appropriate. The conditions I imposed were:

(a) a payment into court of $300,000.00 by the defendant. This sum represents the approximate amount which the plaintiff may be entitled to receive by way of royalties or licence fee for the sale of the quantity of goods in the said invoice;

(b) an affirmation from the defendant disclosing the particulars as to how the said invoice is to be performed by the defendant.