MGA ENTERTAINEMNT, INC. v. COMBUY CO LTD AND ANOTHER

HCA 2445/2017

[2020] HKCFI 642

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2445 OF 2017

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REASONS FOR JUDGMENT

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1.  This is an application for summary judgment against the Defendants for trade mark infringement and passing-off. In the hearing on 25 September 2019, I allowed the application and granted summary judgment against the Defendants. I now give my reasons.

2.  The Defendants were originally represented by Choy Yung & Co (“the Firm”).  Before the hearing, the Firm obtained an order for it to cease to act for the 1^st Defendant.  Though the Firm was still the solicitors on record for the 2nd Defendant, the Firm decided not to make any submissions in the hearing.

THE PLAINTIFF AND THEIR PRODUCTS AND TRADE MARKS

3.  The Plaintiff has been in the toy industry since 1987 and is one of the largest privately owned toy companies in the world based in California.  The Plaintiff has won many accolades and awards over the years.

4.  Since December 2016, the Plaintiff has marketed and sold around the world, including in Hong Kong, a series of collectible fashion dolls packaged in a sphere that is wrapped with 3 to 9 layers of distinctive packaging under the name and mark “L.O.L. SURPRISE!” (“the Plaintiff’s Dolls”).  The idea behind the Plaintiff’s Dolls is to encapsulate, in collectible form, the experience and anticipation of unwrapping a present.  When each layer of distinctive packaging is unwrapped, children can experience the surprise and excitement of the unwrapping experience multiple times until the main attraction, the fashion doll itself in the centre, is revealed.  “L.O.L. SURPRISE!” comes from combining “L.O.L.”, the acronym of “Lil’ Outrageous Littles”, followed by the word “SURPRISE!”, which echoes the concept of experiencing surprises by unwrapping the packaging of the doll.

5.  Since release, the Plaintiff’s Dolls have quickly become a major hit among children and parents worldwide, becoming the number one best-selling toy of 2017 in the United States, the largest toy market in the world, and has received many industry awards in United States, United Kingdom and Australia.  Indeed, they were the hottest selling toys in the Christmas season of 2017 in Hong Kong and there was an article published in South China Morning Post in December 2017 about their popularity.

6.  Between December 2016 and November 2017, US$180 million worth of the Plaintiff’s Dolls had been sold worldwide.

7.  The Plaintiff is also the registered proprietor of 2 “L.O.L. SURPRISE!” trade marks (“the Plaintiff’s Trade Marks”) in Hong Kong registered in Class 28 in respect of toys figures; toys figures playsets; and toy figure clothing as of 25 January 2017 which have been applied onto the Plaintiff’s Dolls:

Registration No.	Mark	Date of Registration	Specification
304032440	(the “Device Mark”)	25 January 2017	Class 28 Toys figures; toy figures playsets; and toy figure clothing
304032459		25 January 2017	Class 28 Toys figures; toy figures playsets; and toy figure clothing

8.  By reason of the aforesaid undisputed evidence adduced by the Plaintiff, I am satisfied that the Plaintiff has built up and enjoys substantial reputation and goodwill in the “L.O.L. SURPRISE!” name and mark and the Plaintiff’s Trade Marks.

THE DEFENDANTS AND THEIR INFRINGING ACTIVITIES

9.  The 1^st and 2^nd Defendants are associated companies.  One Mr Li Jinhuan (李錦桓)(“Li”) is the sole director and shareholder of the 1^st Defendant as well as the managing director and owner of 50% shareholding in the 2^nd Defendant.  Indeed, Li admits that the 1^st Defendant has provided administrative support to the 2^nd Defendant.

10.  According to an e-catalogue downloaded from the website of the Hong Kong Trade Development Council (“HKDTC”), “Combuy” is a toy manufacturer with its head office in Hong Kong, sales office in Guangzhou and factory in Chenghai of Guangdong.  The e-catalogue provides a Hong Kong telephone number and the website “www.combuytoy.com” which is a website maintained by the 2^nd Defendant (“the Website”).  It further extends an invitation to foreign customers to visit the company.

11.  The business card of Li states unequivocally the names and addresses of both the 1^st and 2^nd Defendants and that he is the managing director of both of them.

12.  As seen from the above, it is the business practice of Li and the Defendants to use “Combuy” interchangeably between the 1^st and 2^nd Defendants.

13.  The Plaintiff claims that the Defendants have dealt with counterfeit dolls under the signs “L.O.L. SURPRISE!” and “L.Q.L. SURPRISE!” or other variants thereof (“the Counterfeit Dolls”), and their infringing activities can be particularised as follows:

(i)     the 2^nd Defendant has offered or exposed for sale the Counterfeit Dolls on the Website;

(ii)     between 13 to 17 October 2017, the 2^nd Defendant offered or exposed for sale the Counterfeit Dolls to an investigator engaged by the Plaintiff (“the Investigator”), posing as an Egyptian buyer, by sending to him the quotation list and price list of the Counterfeit Dolls;

(iii)     the 1^st Defendant participated in the Mega Show Part 1 (“Mega Show”) at the Hong Kong Convention and Exhibition Centre between 20 to 23 October 2017, and the Defendants occupied a booth at the Mega Show (“the Booth”) to promote the sale of toys including the Counterfeit Dolls;

(iv)     on 20 October 2017, the Defendants exposed for sale 2 samples of the Counterfeit Dolls and supplied a sample of the Counterfeit Dolls to the Investigator; and

(v)     the Counterfeit Dolls, which constituted instruments of deception, were manufactured by the 2^nd Defendant and distributed by the Defendants with the intention of being sold to traders and exported to overseas markets.

DEFENCES PUT FORWARD BY THE DEFENDANTS

14.  The 1^st Defendant admits that both the Defendants are associated companies but their management ownership and control are different.   The only defence put forward by the 1^st Defendant is that it never participated in the Mega Show at all and thus it could not have exposed for sale 2 samples of the Counterfeit Dolls or supplied a sample of the Counterfeit Dolls to the Investigator.  It also asserts that it has not carried on any business at all.  Hence for claim against the 1^st Defendant, the main issue is whether the 1^st Defendant has participated in the infringing activities.

15.  For the 2^nd Defendant, it does not dispute that it operated the Website.   However, it raises the following defences:

(i)     the 2^nd Defendants was not the manufacturer of the Counterfeit Dolls but they were sourced from other parties in the Mainland;

(ii)     the Website was only targeted at the Mainland market; and

(iii)     the 2 samples of the Counterfeit Dolls at the Mega Show “were not offered, exposed or in any way put for sale”.

MERITS OF THE CLAIM AND THE DEFENCES

(i)     Similarity of the marks and the goods

16.  It is beyond argument that the sale of the Counterfeit Dolls in Hong Kong amounts to infringement of the Plaintiff’s Trade Marks and passing-off, as the marks used in respect of the Counterfeit Dolls are identical and highly similar to the Plaintiff’s Trade Marks.

17.  Insofar as the Counterfeit Dolls which bear the mark “L.O.L. SURPRISE!”, they infringe the Plaintiff’s registered trade mark under s 18(1) of the Trade Marks Ordinance, Cap 559 (“TMO”) as the marks are identical.  The liability for the use of the mark in the Counterfeit Dolls is strict.

18.  Insofar as the Counterfeit Dolls bearing combinations of the marks “L.Q.L. SURPRISE!”, “L.O.L” and “L.Q.L.”, they infringe the Plaintiff’s Trade Marks under s 18(3) of the TMO whereby the signs and the marks are similar and in respect of identical goods.

19.  The Defendants have not advanced any positive defence or shown any cause on oath that the infringing signs are not similar to the Plaintiff’s Trade Marks.  Indeed, taking into the principles for comparing the marks in the context of trade mark infringement[1], the mark used in the Counterfeit Dolls is confusingly similar with the Plaintiff’s mark “L.O.L.”.  There can be no legitimate reason for the choice of such mark other than setting out to deceive, bearing in mind the Counterfeit Dolls are slavish copies.

20.  For the same reasons, the sale of the Counterfeit Dolls in Hong Kong also amounts to passing-off.  The classic trinity for the tort of passing-off[2] are clearly present here:

(i)     the Plaintiff has enjoyed substantial goodwill and reputation attached to the Plaintiff’s Dolls and the Plaintiff’s Trade Marks;

(ii)     the sale or offer for sale of the Counterfeit Dolls amounts to a misrepresentation to the public leading or likely to lead the public to believe that the Counterfeit Dolls are the goods of the Plaintiff; and

(iii)     the Plaintiff has suffered damages as a result of such representation.

(ii)     The defence that the Website was only targeting the Mainland market

21.  There is no serious dispute that the 2^nd Defendant advertised for the sale of the Counterfeit Dolls on the Website.  The only defence put forward by the 2^nd Defendant is that the Website was aimed at the Mainland market, with the result that the claims for trade mark infringement and passing-off are not actionable in Hong Kong

22.  In Dearlove v Combs[3], the court reviewed the authorities and held that the fundamental question is whether or not the average consumer of the goods or services in issue within the local jurisdiction would regard the advertisement and the website as being aimed and directed at him.  All material circumstances must be considered and these will include:

(i)     the nature of the goods or services;

(ii)     the appearance of the website;

(iii)     whether it is possible to buy the goods or services from the website;

(iv)     whether or not the advertiser has in fact sold goods or services in the local jurisdiction through the website or otherwise; and

(v)     any other evidence of the advertiser’s intention.

23.  In my judgment, there is overwhelming evidence to show that average consumer of the goods in issue in Hong Kong would regard the advertisement and the Website as being aimed and directed at him:

(i)     it is clear that the Website was targeting foreign customers outside the Mainland, otherwise there would have been no need for the Website to be presented in English;

(ii)     the Defendants have also joined the HKTDC promoting the sale of their products, and the Website was promoted in the e-catalogue with the HKTDC;

(iii)     customers anywhere in the world could purchase the Counterfeit Dolls on the Website by clicking the “ADD TO CART” function;

(iv)     the business cards of Li distributed at the Mega Show, which was full of international buyers, had the Website printed thereon; and

(v)     the nature of these goods being toys is for international shipment.

24.  Under such circumstances, there is overwhelming evidence to show that the Website was targeting worldwide customers including those from Hong Kong.  The claims for trade mark infringement and passing-off are therefore actionable in Hong Kong.

(iii)    The participation of the Defendants in promoting the sale of the Counterfeit Dolls at the Mega Show

25.  There is no serious dispute that the 2^nd Defendant had participated in the promotion of the sale of the Counterfeit Dolls at the Booth at the Mega Show.  On the other hand, the 1^st Defendant claims that it had nothing to do with such activity.  This cannot be right.

26.  The directory at the Mega Show shows that the occupant of the Booth was “Combuy (Hong Kong)” with a Hong Kong telephone number and a Hong Kong facsimile number.   The Website also shows that the business was operated by a Hong Kong company simply called “Combuy Trading” with identical business and facsimile numbers and an address in Tuen Mun.  Li’s business card had the names of both the 1^st and 2^nd Defendants printed thereon with the identical booth number.  The telephone and facsimile numbers were again identical but the address of the Hong Kong office was at San Po Kong.  The San Po Kong address was the address of the 1^st Defendant’s registered office according to its annual return.  In fact, the Tuen Mun address and the San Po Kong address had been recorded as its registered office and business address in the 1^st Defendant’s Business Registration Certificate.  Under such circumstances, I agree with Mr Shipp, counsel for the Plaintiff, that there is overwhelming evidence to show that the 1^st Defendant was the entity that booked and occupied the Booth and participated in the Mega Show.

27.  Li has put forward a lame excuse that “Combuy” is the abbreviation of the 2^nd Defendant and that “Combuy (Hong Kong)” means the exhibition in Hong Kong.  If that was the case, there was no reason why the telephone and facsimile numbers of the 2^nd Defendant were not used at all.  Further, the 1^st Defendant in its Defence says that it had not carried on any business at all, but on oath, Li admits that the 1^st Defendant has provided administrative support to the 2^nd Defendant which would surely include making the arrangements to participate in the Mega Show.

28.  To raise an arguable issue for trial, the Defendants have to produce documents relating to the participation at the Mega Show and rental of the Booth with the organisers to show it had nothing to do with the 1^st Defendant.  This is a very simple task and yet no documentary evidence has been produced.  Relying on bare assertions are insufficient to show an arguable defence.  Hence, the Plaintiff has established that both Defendants had engaged in the promotion of the sale of the Counterfeit Dolls at the Booth at the Mega Show.  In fact, the evidence clearly shows that both Defendants were acting in concert pursuant to a common design, and they are therefore liable as joint tortfeasors for all the infringing activities alleged by the Plaintiff.

(iv)    The defence that the Defendants had not sold or offered the sale of the 2 Counterfeit Dolls in the Mega Show

29.  The Defendants have jointly possessed the 2 Counterfeit Dolls at the Mega Show.  Either one of them must have imported the Counterfeit Dolls into Hong Kong.  Possessing the Counterfeit Dolls at the Mega Show amounts to stocking goods for the purpose of offering or exposing them for sale or of putting them on the market.  Supplying a sample to the Investigator amounts to exposing the Counterfeit Dolls for sale. 

30.  Indeed, one has to look at the background as to why the Investigator went to the Mega Show.  The email correspondence between Flora (of the Defendants) and the Investigator was exclusively related to the Counterfeit Dolls, and Flora described them as “surprise doll toys” and “LOL toys”.  The quotation supplied by Flora exclusively related to the Counterfeit Dolls.  The whole point of the Investigator visiting the Booth was, therefore, to obtain samples of the Counterfeit Dolls after the email correspondence.

31.  In spite of all this evidence, Li says they were only answering enquiries at a preliminary stage short of selling or offering to sell any Counterfeit Dolls.  However, the fact remains that the Defendants exposed for sale 2 samples of Counterfeit Dolls and supplied a sample to the Investigator which constituted trade mark infringement and passing-off.

32.  Further, it is clear that the Counterfeit Dolls were instruments of deception. The tort of passing-off is complete when deceptive goods are exported or disposed of in Hong Kong even though they may be destined for a foreign market.[4] The dealings of the Counterfeit Dolls by the 2 Defendants at the Mega Show fall into this category.

(v)     The defence that the Defendants were not the manufacturer of the Counterfeit Dolls

33.  The Plaintiff agrees that manufacturing the Counterfeit Dolls in the Mainland, by itself, is not actionable in Hong Kong.  Despite that, the Plaintiff claims the fact that the 2^nd Defendant was the manufacturer is relevant to show that the Defendants had the intention to deceive the public by selling or promoting the sale of the Counterfeit Dolls.

34.  First, it is inconceivable that the Defendant, having been in the business for so long (since 2005 for the 2^nd Defendant), had not heard of the Plaintiff or the Plaintiff’s Dolls.  Second, the Defendants have not supplied any particulars or documents to substantiate their allegation that the Counterfeit Dolls were supplied by other parties.  As this is a summary judgment application, it is incumbent upon the Defendants to condescend upon particulars supported with evidence, which would have been very easy for them to do so and yet they have not done the same.  In the circumstances, the only logical conclusion on the evidence is that the 2^nd Defendant was the manufacturer of the Counterfeit Dolls, when they also emphasized on the Website and the e-catalogue with the HKTDC that they were toy manufacturers and had manufacturing facilities in Guangdong.

35.  In my judgment, there was clear intention to deceive on the part of the Defendants.  Though this may not be a requirement for trade mark infringement, the court has no hesitation in making such adverse finding against the Defendants.

36.  For the above reasons, I find that the Plaintiff has an overwhelming case against both Defendants for trademark infringement and passing-off.  I therefore granted summary judgment against them with costs.