CHINA NATIONAL GOLD GROUP CORPORATION v. HK CHINA GOLD CO LTD

HCA 88/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 88 OF 2013

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D E C I S I O N

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INTRODUCTION

1.  This is the defendant’s application to set aside the judgment dated 18 March 2013 in default of defence.  The guiding principles for setting aside “regular” default judgments are trite: Hong Kong Civil Procedure 2013, Vol 1, para 13/9/12 to 13/9/17 and 13/9/23.

2.  Although the defendant’s summons, taken out on 3 April 2013, contended that the judgment was entered irregularly, by the hearing of this application, the defendant no longer so contended.  Because it is accepted the relevant court documents have been served on the defendant’s registered office, it is proper to proceed on the basis the judgment was “regular”.

3.  Consequently, this application is brought primarily on the basis that the defendant has a meritorious defence.

BACKGROUND

4.  The plaintiff commenced this action in January 2013.  The statement of claim pleads that the defendant has:

(a) infringed the plaintiff’s trade marks;

(b) passed off its goods as the plaintiff’s goods by adopting a name confusingly similar to the plaintiff’s.

THIS APPLICATION

5.  In contending it has a meritorious defence, the defendant relies on the following.  In relation to:

(1) the cause of action based on trades marks:

(a) only one of the 3 trade marks allegedly owned by the plaintiff has been registered in Hong Kong.  Thus, the cause of action must fail in relation to the unregistered ones;

(b) because the defendant’s retail business has only been operated in the Mainland, it could not have used a sign which is identical or similar to the plaintiff’s trade mark in the course of its trade or business in Hong Kong;

(c) the parties’ marks are in any event not identical or similar;

(2) the cause of action based on passing-off:

(a) the plaintiff has no goodwill in Hong Kong, despite being a substantial, well-known and state-owned enterprise in the Mainland;

(b) the defendant has no business operation in Hong Kong.  There has therefore not been any act which could amount to misrepresentation in Hong Kong to ground the cause of action;

(c) in any event, the words (whether Chinese or English) is indistinctive and/or descriptive and/or has a geographical origin.

These arguments will be discussed below.

(a) Trade mark infringement

6.  The plaintiff’s Hong Kong registered trade mark (“the plaintiff’s TM”) is a “composite mark”; that is, it is a mark consisting of both words and logo.  The plaintiff’s TM looks like this:

The defendant is applying for the registration of its mark (“the defendant’s mark”) which is also a composite mark (which application is pending and opposed by the plaintiff).  It looks like this:

7.  It is apparent from the above that the logo part of the parties’ marks is visually quite different.  But four of the Chinese characters (中国黃金) used in both marks are exactly the same.  Moreover, in both, the characters:

(1) have the same font;

(2) are set out horizontally from left to right.

On the other hand, these four characters are:

(a) smaller in size than the logo (and are placed beneath it) in the plaintiff’s TM;

(b) almost the same size as the logo (and are placed to its right) in the defendant’s mark;

(c) accompanied by two characters “香港” (vertically) (meaning “Hong Kong”) on their left in the defendant’s mark.

8.  The test for similarity has been summed up in Christie Manson & Woods Ltd v Chritrs (Group) Ltd [2012] 5 HKLRD 829, para 18 (adopting the summary in Julius Sämann Ltd v Tetrosyl Ltd [2006] FSR 42, para 51).  In short:

(1) the question of similarity between the marks is closely related to the question of likelihood of confusion;

(2) similarity is to be judged through the eyes of the average consumer of the goods in question (who is deemed to be reasonably well-informed and reasonably observant and circumspect);

(3) to assess the extent of similarity, the degree of visual, aural or conceptual similarity has to be determined;

(4) the importance to be attached to the above elements has to be evaluated in relation to the nature of the goods in question and the circumstances in which they are marketed;

(5) the visual, aural and conceptual similarities must be assessed by reference to the overall impressions created by the marks (the average consumer normally perceives a mark as a whole);

(6) the average consumer rarely can make direct comparisons between the marks and relies instead upon the imperfect picture (his level of attention is likely to vary according to the type of goods in question);

(7) a lesser degree of similarity between the marks may be offset by a greater degree of similarity between the goods;

(8) merely because one mark may bring to mind the other mark is insufficient.  However, the risk that the public might believe that the goods came from the same or economically linked undertakings can constitute likelihood of confusion.

9.  Moreover, the word component of a composite mark is the most dominant and distinctive: Tsit Wing (Hong Kong) Ltd v TWG Tea Co Pte Ltd HCA 2210/2011 (24 July 2013), para 104.

10.  Here the goods in issue are the same: gold or gold ornaments.  They are aurally and conceptually identical, containing the word component of the plaintiff’s TM.  Further to this:

(a) as will be mentioned below, the plaintiff and the plaintiff’s TM are long-standing and well-known in the Mainland;

(b) there has been a frequent, regular and high-volume cross-border flow of residents and tourists in both directions between Hong Kong and the Mainland for a long period of time.  It can be inferred at least some of these people would have been aware of the plaintiff and the plaintiff’s TM (see also para 19 below);

(c) the doctrine of imperfect recollection has to be borne in mind;

(d) there is evidence of actual confusion according to the plaintiff’s affirmation.  This is not just mere assertion but is supported by goods seized during a raid on the defendant’s retail outlets in the Mainland.

11.  With these factors in mind, I agree with the plaintiff that the defendant has not been able to establish a real prospect of success in relation to the question of:

(1) similarity of the marks; and

(2) the likelihood of confusion.

12.  On the question of use, the plaintiff relies on ss 18(3) and 18(5), Trade Marks Ordinance (Cap 559):

“A person infringes a registered trade mark if-

(a) he uses in the course of trade or business a sign which is similar to the trade mark in relation to goods or services which are identical or similar to those for which it is registered; and

(b) the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public”;

“For the purposes of this section a person uses a sign if, in particular, he-

(a) applies it to goods or their packaging;

(b) offers or exposes goods for sale under the sign;

(c) puts goods on the market under the sign;

(d) stocks goods under the sign for the purpose of offering or exposing them for sale or of putting them on the market;

(e) offers or supplies services under the sign;

(f) imports or exports goods under the sign; or

(g) uses the sign on business papers or in advertising”.

(emphasis supplied)

13.  I understand that particular reliance has been placed by the plaintiff on:

(a) s 18(3)(a);

(b) ss 18(5)(b), (c) and (g),

Cap 559.  I shall proceed with this appeal on the basis those are the relevant provisions.

14.  The following summary of the defendant’s business is undisputed:

(1) it was incorporated in March 2010;

(2) its sole director and shareholder is one Mr Peng, who used an address in Hunan in the defendant’s company records;

(3) its registered office is the address of a company secretarial service firm (in Kwai Chung);

(4) it has no business operation in Hong Kong, and has been operating retail outlets only in the Mainland;

(5) despite the above, its website represents that:

(a) it is an active business in Hong Kong;

(b) its headquarter is located in a commercial building at Des Voeux Road Central;

(c) it had a history of more than 100 years;

(6) its website server is located in Hong Kong and the domain name is owned by the defendant.

15.  What the plaintiff argues to amount to acts of infringement are these:

(a) the defendant promotes/markets, and offers to supply, goods in the same category as the plaintiff’s using a mark which is confusingly similar to the plaintiff’s TM (see also para 11 above);

(b) the defendant’s website server is located (and hence its website is hosted) in Hong Kong;

(c) the defendant represents on its website it has a strong connection to Hong Kong (see para 14(5) and 14(6) above).

16.  The plaintiff fairly accepts that the use of its trade mark on the internet does not invariably amount to its use within the jurisdiction.  Reference has been made to Kerly’s Law of Trade Marks and Trade Names (2011) 15^th Ed.  The state of the law seems to be this:

(1) the use of a mark on a website which can be accessed from anywhere in the world does not necessarily constitute use of the mark throughout the world (para 27-059 thereof, p 872);

(2) the other extreme, that is, such a use only takes place in the country where the web server is situated is also incorrect (para 27-059 thereof, p 873);

(3) the dividing line is indicated by normal principles.  It is ultimately a question of fact to be decided in the circumstances.  An important matter is whether the website is “aimed and directed” at customers within the jurisdiction and seeks order for delivery to the jurisdiction (going beyond merely waiting in the hope of custom from within the jurisdiction).  The inquiry is an objective one, to be judged from the reasonable user’s understanding when looking at the website (para 27-062 and 27-064 thereof);

(4) what is required is not an established trade within the jurisdiction (although this will be an important factor) but for use of the mark in the course of trade (para 27-062 thereof);

(5) the quality of the internet users is that they are reasonably robust: they expect an internet search to produce a lot of irrelevant sites, and expects many to be foreign (para 27-063 thereof).

(1-800 Flowers Inc v Phonenames Ltd [2000] FSR 697 and Euromarket Designs Inc v Peters [2001] FSR 20 were cited in support)  The above summary has in effect been referred to in the decision of Kabushiki Kaisha Yakult Honsha and Others v Yakudo Group Holdings Ltd and Another (No 4) [2004] 2 HKLRD 587, para 98 to 101.

17.  Taking into account the facts set out in para 14 and 15 above, I agree with the plaintiff the defendant is unable to show a real prospect of success regarding its use of the defendant’s mark within the jurisdiction.

18.  Finally, I do not find the defendant’s reference to other parties using marks similar to the plaintiff’s TM to be able to assist it in this application.  In any event, the plaintiff has taken action against some of them (an example is the judgment of China National Gold Group Corporation v China (HK) Gold Group Shares Ltd, HCA 699/2013 (17 September 2013)).

(b)     Passing-off

19.  That the plaintiff is a well known state-owned enterprise chartered by the State Council is undisputed.  That it is substantial cannot be disputed either; the plaintiff’s affirmation discloses that:

(1) depending on which of the companies one views as the plaintiff’s predecessor(s), the plaintiff’s operation commenced in the Mainland in March 1965, January 1976, September 1979, May 1988 or (at the latest) November 2002;

(2) the plaintiff has continuously advertised its brand and products through the Mainland media.  The total expenses on advertisement from 2003 to 2008 was about RMB73.5 million. The plaintiff has been promoted as “中国黃金” (or “China Gold”);

(3) the plaintiff’s turnover from 2003 to 2008 amounted to some RMB63 billion (and 242.836 kg of gold had been sold);

(4) one of the plaintiff’s flagship subsidiaries has been publicly listed in Hong Kong and Toronto, Canada.  Another subsidiary has been publicly listed in Shanghai;

(5) there were no less than 1,600 retail outlets directly operated, or franchised, by the plaintiff.

20.  I do not accept the defendant’s submission that the plaintiff unarguably lacks trade reputation in Hong Kong, bearing in mind the facts set out in para 10(a), 10(b) and 19 above.  The plaintiff has also deposed that it intends to open retail outlets in Hong Kong.

21.  In relation to the defendant’s trading activities in Hong Kong, I agree with the plaintiff that the facts show an intention on the defendants to trade here:

(a) the defendant’s website shows a strong connection to Hong Kong (para 14(5) and 14(6) above);

(b) a map on the defendant’s website represents its business covers Hong Kong, among other places outside the Mainland;

(c) the defendant is a local company with a server here;

(d) the defendant has applied for the registration of the defendant’s mark in Hong Kong.

I also take into account para 7(c) above.

22.  As regards the question of representation, the two marks have been found to be similar and likely to confuse.  Both parties are in the same industry and operate competing retail outlets.  The defendant has not indicated that it never had the intention to operate in Hong Kong (and will not do so).

CONCLUSION

23.  I do not consider the defendant to have shown a defence with sufficient merits to justify the judgment to be set aside.

24.  This application is therefore dismissed.

OTHER MATTERS

25.  The parties’ closing submissions also mentioned various other points.  These have not been expressly set out or dealt with in the above headings and sub-headings.  This is so only because of the need to balance between the length of the decision and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

COSTS ORDER

26.  There is no apparent reason to depart from the usual rule that costs should follow the event.  There will accordingly be a costs order that the costs of this application be paid by the defendant to the plaintiff.

27.  I consider summary assessment of costs to be appropriate.  The above costs shall thus be so assessed.  For this purpose:

(1) the plaintiff be at liberty to lodge with court and serve a statement of costs within 7 days from today;

(2) the defendant be at liberty to lodge with court and serve a statement of objections within 7 days thereafter.