蓮香茶樓及餅家 (a firm) v. 廣州飲食服務企業集團有限公司

HCMP 133/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 133 OF 2008

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J U D G M E N T

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1.  The applicants instituted these proceedings on 23 January 2008 for a declaration of invalidity of the respondent’s trade mark “蓮香” of Trade Mark Registry No. 1997 B10376 (“the suit mark”) or alternatively an order to revoke the suit mark.

2.  The suit mark was registered on 12 June 1996 upon the application of Guangzhou Lianxiang Lou (“GZ Lianxiang”).  The applicants then applied for registration for two of their trade marks (both bearing the suit mark “蓮香”) in July 2006.  The applications were turned down by the Trade Marks Registry on 10 October 2006 with the citation of the suit mark. 

3.  These proceedings were commenced by an originating summons dated 23 January 2008 and were ordered on 21 January 2009 to proceed as if begun by writ.  These proceedings mainly concern the use of the suit mark in the sale of mooncakes in Hong Kong.  The applicants rely on three grounds for invalidation and two grounds for revocation.

The applicants’ grounds

4.  The grounds for invalidation are:

(i) the application for registration of the suit mark was made by GZ Lianxiang in bad faith contrary to section 11(5)(b) of the Trade Mark Ordinance, Cap 559 (“TMO”) and should be declared invalid under section 53(3).

Sections 11(5)(b) and 53(3) of the TMO provide:

“11. (5) A trade mark shall not be registered if, or to the extent that-

(b) the application for registration of the trade mark is made in bad faith.

53. (3) The registration of a trade mark may be declared invalid on the ground that the trade mark was registered in contravention of section 11 (absolute grounds for refusal of registration).”

(ii) the use of the suit mark as at the deemed date of registration of 12 June 1996 was liable to be prevented by the law of passing off under section 12(5)(a) and should be declared invalid under section 53(5)(b).

Sections 12(5)(a) and 53(5)(b) of the TMO provide:

“12. (5) Subject to subsection (6), a trade mark shall not be registered if, or to the extent that, its use in Hong Kong is liable to be prevented-

(a) by virtue of any rule of law protecting an unregistered trade mark or other sign used in the course of trade or business (in particular, by virtue of the law of passing off); or

…

and a person thus entitled to prevent the use of a trade mark is referred to in this Ordinance as the owner of an “earlier right” in relation to the trade mark.

53. (5) Subject to subsections (6) and (7), the registration of a trade mark may also be declared invalid on the ground-

(b) that there is an earlier right in relation to which the condition set out in section 12(4) or (5) (relative grounds for refusal of registration) is satisfied.”

(iii) the applicants’ marks were entitled to protection as at the deemed date of registration as well known marks under the Paris Convention and the suit mark was registered contrary to section 12(4) and should be declared invalid under section 53(5)(b).

Section 12(4) of the TMO provides:

“12. (4) Subject to subsection (6), a trade mark which is-

(a) identical or similar to an earlier trade mark; and
(b) proposed to be registered for goods or services which are not identical or similar to those for which the earlier trade mark is protected,

   shall not be registered if, or to the extent that, the earlier trade mark is entitled to protection under the Paris Convention as a well-known trade mark and the use of the later trade mark without due cause would take unfair advantage of, or be detrimental to, the distinctive character or repute of the earlier trade mark.”

5.  The grounds for revocation are:

(i) the suit mark has not been genuinely used in Hong Kong for a continuous period of three years prior to the institution of these proceedings and should be revoked under section 52(2)(a).

Section 52(2)(a) of the TMO provides:

“52. (2) The registration of a trade mark may be revoked on any of the following grounds, namely-

(a) that the trade mark has not been genuinely used in Hong Kong by the owner or with his consent, in relation to the goods or services for which it is registered, for a continuous period of at least 3 years, and there are no valid reasons for non-use (such as import restrictions on, or other governmental requirements for, goods or services protected by the trade mark)”

(ii) the suit mark and the goodwill have been separated since October 2006 in that the owner of the suit mark ceased to conduct the business so that the public would be misled about the trade origin of the goods bearing the suit mark.  The registration of the suit mark should therefore be revoked under section 52(2)(c).

Section 52(c) of the TMO provides:

“52. (2) The registration of a trade mark may be revoked on any of the following grounds, namely-

(c) that in consequence of the use made of it by the owner or with his consent, in relation to the goods or services for which it is registered, the trade mark is liable to mislead the public, particularly as to the nature, quality or geographical origin of those goods or services”

The grounds of the respondent’s opposition

6.  The respondent’s case as revealed in the two affirmations it filed is that GZ Lianxiang had been selling mooncakes in Hong Kong with the suit mark since 1984.  It began applying for registration of the suit mark in 1995 in the Mainland, USA, Australia, Hong Kong and under the Madrid Agreement and Protocol.  There was therefore no bad faith in the application for registration of the suit mark in Hong Kong.

7.  Regarding the applicants’ claim of rights under the law of passing off and well known trade mark under the Paris Convention, the respondent relies on the defence in section 13(1)(a) of the TMO of honest concurrent use of the suit mark with the applicants’ trade marks since 1984 to the deemed date of registration.

Section 13(1)(a) of the TMO provides:

“13. (1) Nothing in section 12 (relative grounds for refusal of registration) prevents the registration of a trade mark where the Registrar or the court is satisfied-

(a)   that there has been an honest concurrent use of the trade mark and the earlier trade mark or other earlier right.”

8.  The respondent also denies of the alleged non-use of the suit mark for three years or that the suit mark and the goodwill had been separated.

9.  After the proceedings were ordered to proceed as if begun by writ, the respondent filed its defence on 18 March 2009.  It repeated the grounds of defence adumbrated in the affirmations it had already filed.  It also amended its case on when GZ Lianxiang mooncakes had started to be sold in Hong Kong under the suit mark.  The amended date was 1984 instead of 1980.  

10.  It also added in para 27 of the re-re-amended-defence the further ground of statutory acquiescence by the applicants under section 59 of the TMO in that the applicants had acquiesced for a continuous period of five years in the respondent’s use of the suit mark in Hong Kong.  Section 59 of the TMO provides:

“59. (1) Where the owner of an earlier trade mark or other earlier right has acquiesced for a continuous period of 5 years in the use of a registered trade mark in Hong Kong, being aware of that use, there shall cease to be any entitlement on the basis of that earlier trade mark or other earlier right-

(a) to apply for a declaration that the registration of the later trade mark is invalid; or

(b) to oppose the use of the later trade mark in relation to the goods or services in relation to which it has been so used,

unless the application for registration of the later trade mark was made in bad faith.

(2) Where subsection (1) applies, the owner of the later trade mark is not entitled to oppose the use of the earlier trade mark or the exploitation of the earlier right, as the case may be, notwithstanding that the earlier trade mark or earlier right may no longer be invoked against his later trade mark.”

11.  The respondent pleaded that there was a meeting allegedly held in February 1999 (which was later amended to 2000) in Hong Kong between two representatives of GZ Lianxiang namely Mr Chen Zhaoquan (“ZQ Chen”) and Mr Pan Huanwan (“Pan”) and a representative of the applicants Mr. Ngan Chun Fai Charlton (“CF Ngan”).  The meeting was held to discuss the settlement of a trade mark litigation between the two sides in North America (“the American litigation”).  The respondent further pleaded that CF Ngan in the meeting also requested GZ Lianxiang to stop exporting its mooncakes for sale in Hong Kong, but both ZQ Chen and Pan declined the request. 

12.  Counsel for the respondent in his opening submissions acknowledged that reliance on this ground requires evidence to show that the applicants were already aware of the registration of the suit mark at the date of the alleged meeting (see Budejovicky Budvar v Anheuser-Busch Inc [2012] RPC 11).  The respondent however would wish to rely on the evidence of CF Ngan in cross-examination to make good this point.

13.  CF Ngan admitted in cross-examination that the applicants’ business was managed by his father when the latter was alive.  CF Ngan also admitted that he had some conversations with his father in or before 2000 about applying for registration of the applicants’ marks with the Trade Marks Registry in Hong Kong.  However, his father decided against the proposed registrations for fear of causing conflicts with GZ Lianxiang.  The respondent therefore seeks to infer from this conversation that CF Ngan’s father must have actual knowledge of the registration of the suit mark by GZ Lianxiang in Hong Kong at that time.

14.  The applicants in the reply denied that there was any meeting of CF Ngan with ZQ Chen and Pan in which the export to Hong Kong of GZ Lianxiang mooncakes bearing the suit mark was discussed. 

The undisputed facts

15.  There are some undisputed facts which have been outlined in the closing submissions of the respondent’s counsel.  I adopt them with some modifications as follows:

(a) CF Ngan’s grandfather Ngan Yee Chi was one of the founders of GZ Lianxiang, which was founded in 1910 (宣統二年) in Guangzhou.

(b) GZ Lianxiang was founded to take over a bakery business originally called 連香樓, the name of which was changed to 蓮香樓due to the excellence of its cakes and pastries made of lotus seed paste.  It was and still is also dubbed [蓮蓉第一家] or (the first and foremost house of lotus paste).

(c) GZ Lianxiang marketed in Guangzhou its mooncakes with lotus seed paste filling in a square packaging box similar to the one appearing in B2-310A to B2-310D, but was a paper box at its inception instead of a metal container.  The box has a distinct presentation of the suit mark and the Guangzhou addresses of GZ Lianxiang on the cover.  There are also descriptions on two of the sides of the box indicating that the mooncakes are of GZ Lianxiang.

(d) Ngan Yee Chi together with 70 other shareholders of GZ Lianxiang founded the applicants’ tea house business under the trade name of 蓮香茶樓in Hong Kong on 27.10.1928 [B1/1].

(e) GZ Lianxiang was nationalized in 1957 and became a state-owned company.  Since then, GZ Lianxiang and the applicants have no common partner, connection or interflow.

(f) The applicants have sold their mooncakes in Hong Kong under and by reference to the trade name of 蓮香 and a mark which is the same the suit mark.  Throughout the years they use a packaging [B1-28 and b1-29] to sell their mooncakes.  That is almost identical to the packaging used by GZ Lianxiang. The difference is that the applicants’ box cover clearly states its Hong Kong address.  The sides of the applicants’ box are also very similar to the GZ Lianxiang box except that they state the applicants as the maker of the mooncakes.  The applicants also promote its mooncakes by reference to the nickname of GZ Lianxiang, namely, [蓮蓉第一家] or (the first and foremost house of lotus paste) [B1-34,48,50,53,54,56,58,59,60,61,169].

(g) On 18.9.1995, GZ Lianxiang applied for registration of the suit mark in the United States and the application was granted on 14.7.1998 [B2-253].

(h) On 12.6.1996, GZ Lianxiang applied for registration of the suit mark in Hong Kong and the application was subsequently granted [B2-483].

(i) On 20.1.1998, GZ Lianxiang obtained registration of the word mark 蓮香樓for the United Kingdom, France and Germany under the Madrid Agreement and Protocol [B2-286].

(j) On 13.10.2000, the manager of the applicants CF Ngan attended a meeting on behalf of the applicants in the premises of GZ Lianxiang (“the Guangzhou Meeting”) [A-46].

(k) Guangzhou Lianxiang Lou Company Limited (“GZ Lianxiang Ltd”) was incorporated on 20.7.2005 to take over the business of GZ Lianxiang [C-45].  GZ Lianxiang Ltd was privatized in 2006 and a private entity 廣州市西關世家園林酒家有限公司acquired 99% of its shares.

(l) The registration of the suit mark was assigned to the respondent on 9.10.2006 [B1-124].

(m) The applicants applied for registration for two of their trade marks (both bearing the suit mark “蓮香”) in July 2006.  The Trade Marks Registry turned down the applications on 10 October 2006 with the citation of the suit mark.  The applicants were specifically reminded that the Registry’s objection under section 12 of the TMO may be overcome by the written consent of the owner of the suit mark [B1-105-110].

(n) The applicants commenced these proceedings without a pre-action letter.

AW1 - CF Ngan’s evidence

16.  CF Ngan made an affirmation on 17 March 2008 in support of these proceedings.

17.  He said the applicants started business in Hong Kong in 1926.  They operated a Cantonese tea house and restaurant in the name of 蓮香樓and蓮香茶樓.  They also carried on a bakery business selling cakes and pastries under the marks of 蓮香, 蓮香月餅, 蓮香老餅家and香港蓮香老餅家.  There were 130 partners at the start of the business.  Only the interests of 2 partners survived till today.  In their 80 odd years of business, they always operated in the Central District.  They only moved twice within the district.

18.  He further said that by virtue of the long, extensive and continuous use of the above-mentioned marks, these marks have become distinctive of the applicants.

19.  Of the applicants’ bakery products, the best known items are the different types of mooncakes.  Every year before the mid-Autumn Festival, the applicants advertise their mooncakes by outdoor advertisements and circulars to the public under the mark and device of 蓮香月餅.  On the face of each mooncake is also embossed the Chinese characters蓮香月餅.  This has been the practice for the last 80 years.

20.  The applicants also export mooncakes to its distributors in the US and Canada every year before the mid-Autumn Festival.  They have registered the mark and device 蓮香月餅in Canada and the US on 20 December 1991 and 12 July 1994 respectively.  They also sell other kinds of cakes and pastry under the said marks at their premises.  Over the years they have acquired and maintained a high reputation for their products among the public in Hong Kong.

21.  The applicants’ name is often shortened to 蓮香.

22.  On 10 July 2006, the applicants applied to register at the Trade Marks Registry the marks of 蓮香樓and蓮香for class 30 goods/services.  The mark of蓮香樓was also sought to be registered in other classes appropriate for the tea house and restaurant business.  The application was however blocked because there was on the register the suit mark蓮香for the same items of goods under class 30.  The suit mark that blocked the applicants’ application was registered on 12 June 1996.  It was registered in the name of GZ Lianxiang. The registration was assigned to the respondent in November 2006. 

23.  CF Ngan said that given the reputation and goodwill of the applicants’ business, it was inconceivable that GZ Lianxiang had applied for the registration of the suit mark without knowledge of the applicants’ mark.  He is right on this.  The registration of the suit mark was indeed obtained by GZ Lianxiang with knowledge of the applicants’ mark as the respondent’s defence is honest concurrent use.  In fact, the history of GZ Lianxiang and that of the applicants show that each was aware of the existence of the other.

24.  CF Ngan further said that the use of the suit mark by the respondent for their business would likely lead the general public to think that their business was that of the applicants or in some way connected with the applicants’ bakery business.

25.  Prior to taking out of this application, the applicants had engaged a firm of investigators to investigate whether the suit mark had been used by the respondent or GZ Lianxiang or their authorised person or licensee in Hong Kong in respect of the goods in class 30 in the 3 years before this application.  An investigation was duly conducted into the matter by direct enquiry with the staff of the respondent and GZ Lianxiang as well as by a market survey in Hong Kong. 

26.  An investigator Mr Chan also made an affirmation in support of this application.  Mr Chan said that he was told by the staff of both the respondent and GZ Lianxiang that no 蓮香product or mooncake under the suit mark was sold in Hong Kong. 

27.  Mr Chan also referred to a survey conducted between 5 and 11 December 2007 at 20 well-known department stores and supermarkets in Hong Kong.  None of the people covered by the survey could tell that the suit mark was a brand originated from GZ Lianxiang or the respondent.  But the survey did not cover the cheaper outlets from where the respondent said that GZ Lianxiang mooncakes were sold.

28.  CF Ngan repeated in his witness statement of what he had said in the affirmation.  He denied of knowing that GZ Lianxiang mooncakes were sold in Hong Kong under the suit mark since 1984.  He said GZ Lianxiang mooncakes were sold in Hong Kong only under the 珠江橋牌 (Pearl River Bridge Brand) (“PRB Brand”) trade mark whether before or after 1984.

29.  He also dealt with the meeting raised by the respondent in the defence.  He denied of having met ZQ Chen and Pan in Hong Kong or that he had requested GZ Lianxiang through them not to export mooncakes to Hong Kong.  He said he had only met them in GZ Lianxiang’s premises in Guangzhou and the meeting only discussed the American litigation.  He also produced a copy of the minutes of meeting which contained a settlement agreement in relation to the American litigation.  The minutes also revealed that the meeting was held not in February 1999, but on 13 October 2000 at the premises of GZ Lianxiang in Guangzhou.

30.  He however admitted in cross-examination that his father had met two representatives of GZ Lianxiang brought by a mutual friend Mr Tam in Hong Kong and had arrived at some preliminary agreement with them for settling the American litigation.  His father was not sure of the authority of the two persons and directed him to go to GZ Lianxiang to reduce the agreement in writing and endorse the same with the proper seals of the parties.  He then attended the Guangzhou Meeting.  He also conceded that he might have been asked by his father to join the meeting in Hong Kong when it was about to close.  The purpose was just to tell him about the preliminary agreement reached by the parties, but he could not remember if he had met ZQ Chen and Pan.  He however maintained that he had not requested GZ Lianxiang not to export mooncakes to Hong Kong.

31.  He also admitted that he had repeatedly asked his father to register their trade marks in Hong Kong, but his father said that he had an agreement with the mainland that GZ Lianxiang would not sell its products in Hong Kong and the applicants would likewise not sell their products in the mainland.  This assertion was however not mentioned in the pleadings or his witness statement.  He also said that his father was of the view that they already had a limited company in the name of蓮香and others could not use the name.  His father also thought that GZ Lianxiang was selling its mooncakes in Hong Kong under the PRB Brand and hence the applicants had no need to register. His father also told him of a worry that registration of the trade marks by the applicants in Hong Kong would cause conflict with GZ Lianxiang.

32.  He also maintained that he was only aware in 2006 of GZ Lianxiang’s registration of the suit mark in Hong Kong when he tried to register the applicants’ trade marks after his father’s death.

33.  He also said that he had emphasised in the applicants’ advertisements that their mooncakes were made in Hong Kong.  He did so sometime since 1986 (see B-49 to B-63) because of a request by the US/Canada distributor.  Furthermore, some major Hong Kong mooncake makers had moved their manufacturing base to the mainland whilst the applicants had not.  He therefore emphasised in the advertisements that the applicants’ mooncakes were made in Hong Kong.

RW1 – Lun Kwok Kong’s evidence

34.  The respondent called 4 witnesses.  The 1st witness Mr Lun is the general manager of Cheung Hop Food Stuffs Company Ltd (“Cheung Hop Ltd”).  He has made a witness statement for the respondent.  He said Cheung Hop Ltd and its unincorporated predecessor Cheung Hop Co (“Cheung Hop”) were the importers that imported GZ Lianxiang mooncakes into Hong Kong.  He started working for Cheung Hop in 1965.  In 1976 to 1977, Cheung Hop obtained the sole agency for importing candies, cakes and pastries from Guangzhou and other places in the mainland into Hong Kong.  It also obtained the sole agency to sell products of the PRB Brand in Hong Kong.  The PRB Brand products included mooncakes.  At that time, GZ Lianxiang mooncakes were imported into and sold in Hong Kong under the PRB Brand.  They were not sold under GZ Lianxiang’s own name or the suit mark. 

35.  In 1984, GZ Lianxiang broke away from the PRB Brand and was allowed to export its mooncakes through Cheung Hop into Hong Kong under its own brand name and the suit mark. 

36.  Cheung Hop Ltd was incorporated in 1994.  It took over the business of Cheung Hop and became the importer of GZ Lianxiang mooncakes.  That continued until autumn of 2006.  There was no GZ Lianxiang mooncakes for sale in Hong Kong since 2007.  Lun said that it was because GZ Lianxiang and the sole exporter Tency Enterprise Ltd (“Tency”) could not resolve their difference on pricing and Tency declined to export GZ Lianxiang mooncakes to Hong Kong.

37.  Cheung Hop and Cheung Hop Ltd retailed GZ Lianxiang mooncakes at various Chinese emporiums and supermarkets.  Most of them were not upmarket outlets and only two to three of them had been covered by the investigation ordered by the applicants which was conducted before the commencement of these proceedings.

38.  Prior to GZ Lianxiang’s breaking away from the PRB Brand in 1984, Cheung Hop had promoted GZ Lianxiang mooncakes under the PRB Brand.  Lun in his oral evidence added that since 1984, Cheung Hop also advertised GZ Lianxiang mooncakes under the suit mark though the advertising efforts were more focused on the PRB Brand mooncakes.  Owing to market competition, Cheung Hop from 2000 onwards only advertised GZ Lianxiang mooncakes by distributing plastic carrier bags printed with the suit mark, promotion pamphlets and price lists.

39.  The sale of GZ Lianxiang mooncakes in Hong Kong in the 1980s and 1990s was successful with yearly turnover reaching HK$600,000.  However, a number of Chinese emporiums had ceased business since then and the competition of the mooncake market had become fierce so that the latest annual turnover of GZ Lianxiang mooncakes was less than HK$100,000.

40.  Lun also said in his witness statement that in about 2000, ZQ Chen and Pan had visited him in Hong Kong.  They told him about the American litigation and their meeting with CF Ngan.  They also related to him their refusal of CF Ngan’s request for GZ Lianxiang not to export mooncakes to Hong Kong.

41.  In cross-examination, Lun said that he was not afraid that the sale of GZ Lianxiang mooncakes bearing the suit mark would attract litigation for Cheung Hop.  The reason being that the mooncake box clearly stated that the cakes were from Guangzhou and had the addresses of GZ Lianxiang printed on it.  He also said that when Cheung Hop (and Cheung Hop Ltd) sold GZ Lianxiang mooncakes, he would state that they were from GZ Lianxiang.  He also maintained that the ordinary customer would not confuse GZ Lianxiang mooncakes, being mainland mooncakes, with the applicants’ mooncakes.

RW2 – Zhang Xueqing’s evidence

42.  Madam Zhang made an affirmation and a witness statement.  She was a former chairman of the board of GZ Lianxiang Ltd. which is the corporate successor of GZ Lianxiang.  She joined GZ Lianxiang in 1980 as a sales person.  She referred to the history of GZ Lianxiang the business of which was taken over by GZ Lianxiang Ltd in 2005.  GZ Lianxiang Ltd was privatised in 2006 when 99% of its shares was acquired by a mainland private business entity.  This has already been summarised in the undisputed facts above. 

43.  Zhang also said when she joined GZ Lianxiang in January 1980, it had already been exporting mooncakes to places outside the mainland every year before the mid-Autumn Festival.  She was a sales person, but she also took part in packaging the mooncakes for export.  She recalled that the mooncake box of GZ Lianxiang then used appeared to be the same as that described in the undisputed facts above.

44.  She also recalled that prior to 2002 or 2003, the export of GZ Lianxiang mooncakes was undertaken by a state-owned export company.  The Hong Kong importing company was Cheung Hop.  The Hong Kong representative of Cheung Hop in charge of the import was Lun with whom she was acquainted since around July 1980.  Lun or his representative visited GZ Lianxiang every year before the mid-Autumn Festival to confirm the quantity of mooncakes to order.  Lun sometimes also inspected the production process.  Hence, they became acquainted with one another.

45.  She also said that GZ Lianxiang mooncakes were very popular in Hong Kong in the 1980s and 1990s.  The then annual value of sale to Hong Kong was at about HK$600,000 to HK$700,000.

46.  From 2002 to 2003, the exporting company was privatised and the export of GZ Lianxiang mooncakes was undertaken by another company Tency which sold the mooncakes to Cheung Hop.  Zhang also produced some documentation to prove the export of mooncakes through Tency up to 2006 (D-1 to D-87).

47.  She then referred to intellectual rights.  She said that from 1995 onwards, the concept of intellectual property was strengthened gradually in the mainland.  GZ Lianxiang also realised the need to register its trade mark at places where its mooncakes were sold.  It then obtained registrations in various countries and in Hong Kong as referred to in the undisputed facts above.  This was supported by copies of the registration documents produced by the respondent.  She was responsible for applying for the registration in Hong Kong.  She confirmed that GZ Lianxiang had no intention absolutely to pass off its products as the applicants and that the mooncakes of GZ Lianxiang had been on sale in Hong Kong for a long time and had good business repute before the registration. 

48.  I understand Zhang to mean that GZ Lianxiang mooncakes had good business repute as the mooncakes of GZ Lianxiang and not as the mooncakes of the applicants.  Hence, she said there was no intention to pass off GZ Lianxiang mooncakes as the mooncakes of the applicants.

49.  Her evidence is strengthened by the design or get-up of the GZ Lianxiang mooncake box.  The box has a distinct presentation of the suit mark with GZ Lianxiang’s addresses in Guangzhou on the cover.  The descriptions on two of the four sides of the box also indicate that the mooncakes are of GZ Lianxiang and not the applicants.  Anyone looking at this cake box will not be misled into thinking that this is a box of mooncakes of the applicants but will understand that this is a box of mooncakes of GZ Lianxiang of Guangzhou.  That is indeed also the evidence of Lun of Cheung Hop.

50.  Zhang also confirmed that there was a national policy that if a long standing business should be privatised, its intellectual property rights should not be privatised together with the business, but should be held by a state own entity.

51.  Zhang repeated in her witness statement of what she had said in her affirmation.  She also referred to the American litigation and the two meetings that ZQ Chen had testified to.  Her evidence in this respect is hearsay in nature save her assertion that ZQ Chen had reported in a weekly management meeting of his alleged refusal to CF Ngan’s request for GZ Lianxiang not to export mooncakes to Hong Kong.

RW3 – Chen Xiaohong’s evidence

52.  Madam Chen has made an affirmation and two witness statements.  She is a deputy general manager of the respondent.  She recounted in her affirmation and first witness statement the history of GZ Lianxiang and subsequently GZ Lianxiang Ltd. That has already been summarised in the undisputed facts above. 

53.  Before its privatisation in 2006, GZ Lianxiang was subject to the supervision of the respondent though the respondent did not take part in the management of its daily affairs.  Madam Chen disputed the correctness of the information gathered by the applicants’ investigator from a staff member of the respondent.  She also asserted that the staff member allegedly spoken to by the investigator did not have knowledge of the facts for answering the enquiry of the investigator.

54.  Regarding the intellectual property rights of GZ Lianxiang, she said that all the trade mark registrations obtained in the mainland and overseas (including Hong Kong) were assigned by GZ Lianxiang Ltd to the respondent upon privatisation of the former in 2006.

55.  After privatization, the respondent authorized exclusively the new majority shareholder (99% share holding) of GZ Lianxiang Ltd to use through GZ Lianxiang Ltd the GZ Lianxiang trade mark for an annual royalty of about RMB1.3 million.

RW4 – Chen Zhaoquan’s evidence

56.  ZQ Chen has made two witness statements.  He referred to a permit issued by the mainland government allowing him to come to Hong Kong.  He said he and Pan came here on 28 September 2000 and returned to the mainland at about noon on the next day.  They came here for a meeting with CF Ngan at Diamond Restaurant in Sheung Wan on 28 September.  The meeting was arranged by a mutual friend Mr Tam for discussing a settlement of the American litigation.  In the course of the meeting, both ZQ Chen and CF Ngan lamented the decline of their respective mooncake businesses.  CF Ngan then requested GZ Lianxiang through ZQ Chen and Pan not to export mooncakes to Hong Kong, but they declined the request.  The parties later held a 2nd meeting at the premises of GZ Lianxiang in Guangzhou and the settlement agreement was reached and signed by both sides.

The issues between the parties

57.  The applicants rely on three grounds for invalidation of the registration of the suit mark.  They are :

(i)    the respondent registered the suit mark in bad faith under sections 11(5)(b) and 53(3) of the TMO;

(ii)   the use of the suit mark by the respondent as at the deemed date of registration of 12 June 1996 was liable to be prevented by the law of passing off under sections 12(5)(a) and 53(5)(b) of the TMO; and

(iii)   the applicants’ marks were entitled to protection as at the deemed date of registration of 12 June 1996 under the Paris Convention and the respondent’s suit mark was registered contrary to sections 12(4) and 53(5)(b) of the TMO.

58.  The applicants also rely on two grounds for revocation of the registration of the suit mark.  They are:

(i)    the suit mark has not been genuinely used in Hong Kong for three years prior to the institution of these proceedings on 23 January 2008 and the registration should be revoked under section 52(2)(a) of the TMO; and

(ii)   the suit mark and the goodwill have been separated since October 2006 in that the owner of the suit mark ceased to conduct the business so that the public would be misled about the trade origin of the goods bearing the suit mark.  The registration should thus be revoked under section 52(2)(c) of the TMO.

59.  The respondent relies on the defences of statutory acquiescence by the applicants under section 59 of the TMO and honest concurrent use by the respondent from 1984 to the deemed date of registration of the suit mark on 12 June 1996.

Concessions by the respondent on the applicants’ goodwill

60.  The respondent accepts that for the purpose of the law of passing off, the applicants do have goodwill in their trade marks (para 46 of the respondent’s closing submissions).  The respondent also accepts that the trade marks of the applicants are well-known trade marks in Hong Kong within the meaning of section 4 of the TMO (para 51 of the respondent’s closing submissions).  It appears that the respondent is prepared to consent to the applicants’ applications to register their trade marks.  However, the applicants do not seem to be contented with having concurrent registrations with the respondent, hence these proceedings have to run the full course.

The issue of separation of the suit mark and the goodwill

61.  In the light of the fact that the respondent has authorised the use of the suit mark by GZ Lianxiang in return for an annual royalty, there is no separation of the suit mark from the goodwill.  The applicants therefore fail in the last ground under section 52(2)(c) of the TMO.

The issue of no genuine use for 3 years prior to these proceedings

62.  There is no dispute that GZ Lianxiang mooncakes had been for sale in Hong Kong for decades.  The respondent further alleged that since 1984, these mooncakes had been sold in Hong Kong under the suit mark.  The sale only stopped in 2007 because of a price difference between GZ Lianxiang Ltd and its mainland exporter Tency.

63.  However, the applicants maintained that GZ Lianxiang mooncakes were sold under the PRB Brand.  CF Ngan also insisted that he never knew that such cakes had been sold under the suit mark rather than the PRB Brand. 

64.  There are nevertheless contemporaneous price lists (D-1, 2, 3, 11, 44, 45 and 74), promotional pamphlets and a plastic shopping bag showing that at the latest since 1999 and up to 2006, GZ Lianxiang mooncakes had been sold in Hong Kong under the suit mark.  The authenticity of these documents and plastic bag is not disputed.  I therefore hold that GZ Lianxiang mooncakes had been sold in Hong Kong under the suit mark since 1999 at the latest until October 2006.  The ground of revocation based on non-use for three years prior to institution of proceedings therefore fails too.

The issue of statutory acquiescence  

65.  There is a factual dispute on whether it was CF Ngan or his father who represented the applicants in the Hong Kong Meeting with ZQ Chen and Pan in Diamond Restaurant on 28 September 2000.  The respondent’s case is that CF Ngan was the applicants’ representative and he had in the meeting asked GZ Lianxiang through ZQ Chen and Pan not to export mooncakes to Hong Kong.  The respondent wants to establish this to rely on the statutory acquiescence under section 59 of the TMO. 

66.  The applicants on the other hand deny strenuously that CF Ngan had taken part in the Hong Kong meeting with ZQ Chen and Pan or had requested GZ Lianxiang not to export mooncakes to Hong Kong.

67.  Counsel for the respondent accepts that mere knowledge on the part of the applicants of the use by the respondent of the suit mark in Hong Kong is insufficient.  The respondent must also prove that the applicants were also aware of the respondent’s registration of the suit mark.  On this point, the respondent referred to CF Ngan’s evidence in cross-examination and asked the court to infer such knowledge on the part of the applicants.  CF Ngan said in cross-examination that his father worried that registration of the applicants’ trade marks in Hong Kong would cause conflict with GZ Lianxiang.

68.  I do not think it can be inferred on a balance of probability that the worry of CF Ngan’s father about conflict with GZ Lianxiang was because his knowledge of the respondent’s registration of the suit mark in Hong Kong.  Since the applicants and their predecessors had traded with their trade marks in Hong Kong since 1928, if CF Ngan’s father should have knowledge of Guangzhou Lianxiang’s registration of the suit mark, he could have asked GZ Lianxiang for permission to have a concurrent registration.  However, there is no evidence that the applicants or Ngan’s father had ever asked GZ Lianxiang for permission to apply for concurrent registration. 

69.  Furthermore, if the worry of Ngan’s father should have been caused by his knowledge of the respondent’s registration of the suit mark, he would have told CF Ngan that the applicants could not register because the respondent had already done so.  Alternatively, he would have said that the applicants should ask GZ Lianxiang for consent to have a concurrent registration.  He would not have told Ngan that registration of the applicant’s trade marks would cause conflict with GZ Lianxiang.  No such conflict would come about if GZ Lianxiang did not give consent and the applicants could not register.  If consent was forthcoming, there would also have been no conflict as any potential conflict would have militated against the giving of consent. 

70.  I think Ngan’s father might have been aware of the sale of GZ Lianxiang mooncakes in cheaper retail outlets in Hong Kong under the suit mark, but not the registration of the suit mark.  If so, his worry might have been that the registration of the trade marks by the applicants could prevent the sale in Hong Kong of GZ Lianxiang mooncakes under the suit mark.  In that event, there would be conflict with GZ Lianxiang.  In order to avoid the potential conflict, he just let the status quo continue.  I would however say that this is just a guess and I would refrain from making any such finding for paucity of evidence.

71.  I therefore hold against the respondent on a balance of probability on whether the applicants were aware of the respondent’s registration of the suit mark at the time when the respondent was selling its mooncakes under the suit mark in Hong Kong.  I accept the evidence of CF Ngan that he became aware of the registration of the suit mark only when the applicants’ applications for registration of trade marks were refused. 

72.  Having made this finding, I do not think it necessary to find whether CF Ngan had attended the meeting with ZQ Chen and Pan on 28 September 2000 at Diamond Restaurant and requested GZ Lianxiang not to sell its mooncakes in Hong Kong.  The respondent will not succeed on the issue of statutory acquiescence under section 59 of the TMO regardless of how I may resolve this dispute. 

The issue of honest concurrent use

73.  There is a dispute on whether GZ Lianxiang mooncakes were sold under the suit mark or the PRB Brand since 1984.  Lun has given evidence that GZ Lianxiang was able to break away from the PRB Brand for exporting mooncakes to outside the mainland.  There is no dispute that GZ Lianxiang had all along been using the suit mark in selling its mooncakes in the mainland.  CF Ngan accepted that since about 1984, GZ Lianxiang mooncakes were sold in North America under the suit mark.  In these circumstances, there was no reason for GZ Lianxiang to continue exporting mooncakes to Hong Kong under the PRB Brand after 1984 and not to do so in its own name and mark.  I accept the evidence of Lun and Madam Chen on this issue and hold that GZ Lianxiang mooncakes had been sold in Hong Kong under the suit mark since 1984.

74.  The fact that the suit mark is being used on the packaging box of GZ Lianxiang and that of the applicants is because the applicants used to be related to GZ Lianxiang and both had used the suit mark for decades in their respective bases of business of Hong Kong and Guangzhou.  It is however important to note that the price lists and packaging of GZ Lianxiang mooncakes all say prominently that the cakes were of GZ Lianxiang from Guangzhou and not the applicants’ cakes which were made in Hong Kong.  Lun’s evidence also makes it clear that Cheung Hop never sold GZ Lianxiang mooncakes as the applicants’ cakes but always made it clear that they were cakes made in the mainland by GZ Lianxiang.  The price lists printed by Cheung Hop and Cheung Hop Ltd for advertising GZ Lianxiang mooncakes also reinforced Lun’s evidence which I accept. 

75.  The respondent in the supplemental closing submissions also submitted that the reference to the Guangzhou addresses of GZ Lianxiang in the packaging box was an effective means for distinguishing the mooncakes of GZ Lianxiang from those of the applicants (para 8(g)).  I would add that the efforts by Cheung Hop and Cheung Hop Ltd to distinguish GZ Lianxiang cakes from the applicants’ cakes and the designs of the price lists and GZ Lianxiang packaging box also contributed to the avoidance of any risk of confusion despite the use of the suit mark by both parties in their packaging boxes.

76.  The applicants also pointed out in the supplemental closing submissions that the price lists and advertising pamphlets published by Cheung Hop and Cheung Hop Ltd (D-1, 2, 3, 11, 44, 45 and 74) all described GZ Lianxiang mooncakes as 廣州蓮香月餅 (Guangzhou Lianxiang Mooncake).  They also highlighted Lun’s evidence that the reason for using the characters 廣州 (Guangzhou) was to avoid confusion as Lun knew that the suit mark had been used by the applicants in Hong Kong for decades before GZ Lianxiang sold its moon cakes in Hong Kong by reference to the suit mark in 1984.

77.  I do note that the plastic bag used by Cheung Hop and Cheung Hop Ltd for carrying mooncakes in boxes has the PRB Brand printed on one side and the suit mark describing the characters 月餅 (mooncakes) printed on the other but without any reference to Guangzhou or GZ Lianxiang.  But the bag is only used after the clinching of a sale.  In clinching the sale, the consumer had already been apprised fully that he was purchasing a box of Guangzhou Lianxiang mooncakes made by Guangzhou Lianxiang in Guangzhou.

78.  On the basis of the evidence of Lun and Zhang, the price lists and packaging referred to above and the submissions from both sides, I accept that consumers who bought GZ Lianxiang mooncakes knew that they were buying Guangzhou mooncakes made by GZ Lianxiang and not mooncakes of the applicants.

79.  Owing to the above evidence and submissions, I raised in the course of final submissions 2 issues and asked for supplemental submissions on them.  The issues as encapsulated in the respondent’s supplemental closing submissions are:

(a)    The respondent might have registered for “廣州蓮香” or “廣州蓮香樓”.  But back in 1996, would the use of the suit mark “蓮香” or “蓮香月餅” by the respondent amount to passing off?

(b)   Even if the respondent has been selling mooncakes in Hong Kong from 1982 to 1996 in the cake box pattern or get up as produced, it might only have acquired the goodwill by prolong use of the mark with an identification of the place of making of the mooncakes being Guangzhou.  The mark simpliciter does not have such identification and hence could result in confusion.  It was the identification to Guangzhou that avoided confusion.

80.  I have been referred to the CFA’s decision in Re Ping An Securities Ltd [2012] 2 HKLRD 890 where Gault NPJ has set out in para 18 the approach to determine a challenge to trade mark registrations:

“18. In the context of a challenge to trade mark registrations, there may be no actual conduct of the defendant at the material date of application for registration. For that reason it is necessary to postulate any normal and fair use that may be made of the trademarks and to determine whether that would constitute passing off. Examples of such notional passing off approach in this context are to be found in the REEF, WILD CHILD and DIXY FRIED CHICKEN cases.”[1]

Both sides agree that the applicants should prove on a balance of probability that a normal and fair use of the suit mark by the respondent as at 12 June 1996, the date of deemed registration would have constituted passing off.

81.  The respondent has accepted that the applicants have a goodwill in the trade marks for passing off purpose (para 46 of the respondent’s closing submissions).  The respondent further submitted in the supplemental closing submissions that no passing off would have been constituted.  It referred to the respondent’s use of the suit mark since 1984 until its registration on 12 June 1996.  It submitted that the trade marks used by the applicants in Hong Kong were derived from Guangzhou Lianxiang which was the applicants’ origin.  The public in Hong Kong could well expect that Guangzhou Lianxiang might import its own mooncakes into Hong Kong for sale. 

82.  The respondent then referred to the Guangzhou addresses of GZ Lianxiang being printed on the packaging box and by reason of the long term sale of these mooncakes in Hong Kong, the public in Hong Kong should come to know that the suit mark simpliciter could also be identified with GZ Lianxiang mooncakes. 

83.  The respondent thus asserted that in 1996, the suit mark 蓮香 simpliciter when applied to mooncakes for sale in Hong Kong would not suggest exclusively that the mooncakes are those of the applicants, but would include GZ Lianxiang mooncakes.  Hence, in line with this argument, a normal and fair use of the suit mark simpliciter by GZ Lianxiang on its mooncakes in 1996 in Hong Kong could not be a misrepresentation likely to lead the public to believe that the mooncakes were of the applicants. 

84.  If this is the whole of the respondent’s supplemental submissions, then it is contrary to Lun’s evidence who said that he was not worried about the risk of litigation against Cheung Hop as the packaging box clearly stated that the cakes were from Guangzhou and had the addresses of Guangzhou Lianxiang printed on it.  However, the respondent continued to submit that the reference to the Guangzhou addresses of GZ Lianxiang was an effective means for distinguishing GZ Lianxiang mooncakes from the applicants.  This amounts to a concession that but for the distinguishing addresses of GZ Lianxiang printed on the box, there would have been confusion. Since the respondent has accepted that the applicants do have goodwill in their trade marks for the purpose of passing off, this concession is inevitable.

85.  The respondent also relies on Re CSS Jewellery Co Ltd [2010] 2 HKLRD 890.  However, the two jewellery houses in that case had been using the same trade mark in Hong Kong for decades.  There was indeed honest concurrent use of the same mark in that case.  There was also no geographical designation applied to the goods of one so as to distinguish it from that of the other. 

86.  The applicants submitted in the supplemental closing submissions that if GZ Lianxiang had built up a reputation, it is not a reputation in the suit mark simpliciter, but in the suit mark in conjunction with the geographical designation of 廣州 (Guangzhou) or the name of GZ Lianxiang廣州蓮香樓 (Guangzhou Lianxiang Lou).

87.  In the light of the above discussion, this submission is clearly correct.  I hold that the mere use by GZ Lianxiang on 12 June 1996 of the suit mark simpliciter for sale of mooncakes in Hong Kong would have led to confusion of whether such mooncakes were of the applicants.

88.  I further hold that the respondent’s use of the suit mark since 1984 was in conjunction with the words 廣州 (Guangzhou) or 廣州蓮香樓 (Guangzhou Lianxiang Lou).  It was not a use of the suit mark simpliciter.  Therefore there was no honest concurrent use of the suit mark by the respondent under section 13(1)(a) of the TMO and I so hold.

89.  In the premises, I declare that the registration of the suit mark is invalid under sections 53(5)(b) and 12(5) of the TMO for the reason of passing off.

The issue of protection of well known mark under the Paris Convention

90.  The respondent also accepts that the applicants trade marks are well-known trade marks in Hong Kong within the meaning of section 4 of the TMO (para 51 of the respondent’s closing submissions).

91.  The respondent has not shown any due cause for using the suit mark simpliciter.  Its use of the suit mark simpliciter will certainly cause confusion in the mind of the public and is detrimental to the distinctive character and repute of the applicants.  It would also enjoy an unfair advantage of the goodwill of the applicants.  I therefore further declare that the registration of the suit mark is invalid under sections 53(5)(b) and 12(4) of the TMO.

The issue of the respondent applying for registration in bad faith

92.  Finally on the ground of invalidation based on bad faith under sections 53(3) and 11(5)(b) of the TMO, I do not think GZ Lianxiang had applied to register the suit mark out of bad faith.  The application was made pursuant to a national policy. 

93.  GZ Lianxiang apparently was not bothered too much about confusion in the Hong Kong public when it exported mooncakes to Hong Kong under the suit mark since 1984.  It simply used the packaging box it had been using in the mainland.  Cheung Hop on the other hand was careful to distinguish such cakes as from GZ Lianxiang and not the applicants and to avoid confusion. However, the registration of the suit mark did not appear to have involved Cheung Hop. 

94.  The applicants further submitted that GZ Lianxiang had registered the suit mark in Hong Kong not only for mooncakes, but also for some categories of food and services that it had not made available in Hong Kong.  The applicants thus submitted that such conduct shows bad faith in GZ Lianxiang.  Madam Chen explained that the registration for the additional items did not incur more costs.  She chose to have the additional registrations thinking that such registrations might be of use to GZ Lianxiang in future. Such thinking is of course erroneous, but does not necessarily show bad faith. I accept her explanation that the wrongful additional registrations were made out of ignorance rather than ill will.  The respondent has already applied for the revocation of these registrations.

95.  In the premises, I do not think GZ Lianxiang had any improper motive in applying for the registration of the suit mark.  I do not think the pursuit of a national policy to protect the goodwill of long standing businesses can be described as bad faith.  I therefore dismiss this ground of invalidation.

Costs order nisi

96.  Finally, I make a costs order nisi that the respondent do pay the applicants the costs of these proceedings.