APPLE INC.AND ANOTHER v. PROVIEW INTERNATIONAL HOLDINGS LTD (唯冠国际控股有限公司) AND OTHERS

HCA739/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 739 OF 2010

--------------------------

BETWEEN

--------------------------

------------------------------------------

REASONS FOR DECISION

------------------------------------------

1.  This is an application for interlocutory injunctions, which I allowed on 28 June 2011. These are the reasons for my decision.

2.  The background leading to these proceedings may be summarized as follows.

A. BACKGROUND

A.1. The parties

3.  Apple, a US company established in January 1977, is a world renowned leader in the business of designing, manufacturing and marketing of a wide variety of innovative products including computers, iPod media players, iPhones and iPads. IP Application, an English company incorporated in August 2009, is a special purpose company set up and used by Apple to acquire trademarks related to the name “iPad”.  They are the plaintiffs in these proceedings.

4.  The defendants come from the Proview Group.  The Proview Group is a producer of display devices.  Its major products include LCD monitors, CRT monitors and flat-panel digital products.  It has operations and offices around the world, including Taiwan, Mainland China (Shenzhen and Wuhan), Hong Kong and Europe.  Its holding company is Proview Holdings, which was incorporated in Bermuda and is listed on the Hong Kong Stock Exchange.

5.  Yang Long San, Rowell (“Yang”), a Taiwanese, is the founder of the Proview Group.  He was at all material times the chairman and chief executive officer of Proview Holdings until he was adjudicated bankrupt on 2 August 2010.  Other companies of the Proview Group that feature in these proceedings are Proview Electronics, a Taiwan company, Proview Shenzhen and Yoke Technology, both being Shenzhen companies.  Yang was at all material times the responsible person and director of Proview Electronics.  He was also the legal representative, general manager and chairman of both Proview Shenzhen and Yoke Technology and remains so despite his bankruptcy.

A.2. The disputes

6.  In January 2010, Apple announced its new tablet computer branded “iPad”.  It was first launched on the US market on 3 April 2010 and then in other places around the world one month later. It has since become much sought after worldwide.  As at June 2010, over 1 million units had already been sold in the US market alone.  Its success is phenomenal.

7.  In preparation for the launch of iPads, Apple caused investigations to be conducted throughout the world to identify registered trademarks associated with the name “iPad” with a view to acquiring them.  As Mr Paul Schmidt of Messrs Baker & Mackenzie (“B&M”), solicitors for Apple and IP Application explained in his second affidavit :

“17. … Apple’s products are highly sought after by consumers throughout the world and the launch of every new product by Apple is eagerly awaited and the subject of much media coverage. Accordingly, in the lead up to the launch of a new product, Apple faces the dual challenges of maintaining the confidentiality of the product (including its features and the name or trade mark under which it will be marketed) and ensuring that upon its launch, the product can be marketed under the name or trade mark selected for it. The latter challenge is met, inter alia, by Apple securing all requisite trade mark registrations worldwide prior to the announcement and launch of the new product. However, in order to maintain confidentiality and the anonymity of Apple, this is done through special purpose companies incorporated for the purpose for securing such requisite trade mark registrations. Based on my 16 years’ experience as a lawyer, and in particular, 7 years of experience as a trade marks lawyer, it is my experience that this practice of using special purpose vehicles to secure trade mark registrations in order to preserve the anonymity of a well known company and the confidentiality of its plans to launch a new product is a common practice throughout the world, and especially in mainland China.

18. Accordingly, in 2009, Apple carried out investigations into the use of trade marks associated with the name ‘iPad’ via its lawyers and agents… in preparation for the proposed announcement and launch of its iPad branded device in early 2010.”

8.  The investigations revealed that Proview Group owned trademark registrations in eight countries or territories (“the Subject Trademarks”) including two trademark registrations in the Mainland, Registrations Nos. 1590557 and 1682310 (“the China Trademarks”).  Negotiations between an agent engaged by Apple and IP Application and Proview Group’s representatives then took place between August and December 2009.  Eventually, IP Application and Proview Holdings, Proview Electronics and Proview Shenzhen (“the Contracting Defendants”) entered into a written agreement in December 2009 whereby the Contracting Defendants agreed to sell, transfer and assign the Subject Trademarks to IP Application for £35,000 (“the Agreement”).

9.  It is Apple and IP Application’s case that in the process of drawing up the formal written agreement (“the Written Agreement”) and the assignments (“the Country Assignments”) to give effect to the Agreement, the representatives of the Contracting Defendants represented and led IP Application to believe that all the Subject Trademarks, including in particular the China Trademarks, were owned by and registered in the name of Proview Electronics.  Accordingly, the Written Agreement and the Country Assignments executed on 23 December 2009 expressly stated that Proview Electronics was the proprietor of the Subject Trademarks including the China Trademarks and that Proview Electronics warranted that it was the unencumbered sole owner of the Subject Trademarks including the China Trademarks.  The Country Assignment pertaining to the China Trademarks (“the China Country Assignment”) also recited that Proview Electronics was the proprietor of the China Trademarks.  However, after Apple had announced the launch of iPads in January 2010, it was discovered that the China Trademarks were in fact registered in the name of Proview Shenzhen.  The China Country Assignment was accordingly ineffective in assigning the China Trademarks to IP Application.

10.  Apple and IP Application further complained that while acknowledging that a mistake had been made in the China Country Assignment, the Contracting Defendants refused to rectify the mistake and suggested that Apple should pay US$10 million to purchase the China Trademarks.

11.  On 24 March 2010, Apple and IP Application, through B&M, issued a letter to the Contracting Defendants demanding them to transfer the China Trademarks to them.  The Contracting Defendants refused to do so.

B. APPLICATIONS FOR INTERIM INJUNCTIVE RELIEF

B.1. Events leading to the applications

12.  Since early April 2010, there had been intermittent reports in the media suggesting that the Proview Group, in particular Proview Holdings and Proview Shenzhen were about to sell or dispose of the China Trademarks.  When pressed by B&M, Proview Holdings and Proview Shenzhen gave an undertaking on 9 April 2010 not to sell the China Trademarks before 30 April 2010.  On 29 April 2010, Proview Shenzhen, through its solicitors, gave a further undertaking not to sell or otherwise dispose of the China Trademarks until 31 May 2010 in order to facilitate further discussions for a commercial resolution of the dispute.

13.  Despite the second undertaking, press reports about the possibility of Proview Holdings and Proview Shenzhen selling the China Trademarks continued to surface.  In response to B&M’s demands, Proview Shenzhen, through its solicitors, reiterated on 12 May 2010 that it had no intention of selling or otherwise disposing the China Trademarks until 31 May 2010.

14.  In the meantime, the fact that the Proview Group was in financial difficulties began to emerge.  In fact, on 12 May 2010, the Hong Kong Stock Exchange issued a notice that trading of Proview Holdings’ shares had been suspended. Legal proceedings had been instituted against Proview Holdings, Proview Shenzhen and Yang in the Mainland seeking recovery of substantial assets.  More pertinently, B&M found out that China Minsheng Banking Corporation had obtained an asset preservation order (“APO”) against Proview Shenzhen and that such asset preservation order had since March 2010 been registered with the Mainland Trade Mark Office (“TMO”) over the China Trademarks.

15.  Apple and IP Application immediately commenced the present action on 20 May 2010.

16.  On 24 May 2010, they instituted proceedings against Proview Shenzhen in the Shenzhen Intermediate People’s Court and filed an application for APO in respect of the China Trademarks.  The application was granted on 12 June 2010 but subject to the APOs obtained by some other Mainland banks.

17.  Further searches revealed that contrary to its undertakings, Proview Shenzhen had in fact lodged applications with the TMO to transfer the China Trademarks to Yoke Technology on 7 May 2010.

B.2. Applications

18.  On 2 June 2010, Apple and IP Application applied, ex parte, for interim injunctive relief against Proview Holdings, Proview Shenzhen, Yang and Yoke Technology essentially to preserve the China Trademarks.  Deputy Judge Carlson allowed the application.

19.  On 3 June 2010, Apple and IP Application took out the present inter parte summons (“the Summons”), which was returned for the first hearing before Sakhrani J on 11 June 2010.

20.  Proview Shenzhen and Yoke Technology were then absent.  Sakhrani J granted the interim relief sought against them until trial or further order.

21.  Proview Holdings and Yang were legally represented.  After hearing arguments, Sakhrani J ordered that until the determination of the Summons, Proview Holdings be restrained from dealing in or with the China Trademarks and Yang be restrained from procuring, assisting or authorizing Proview Holdings, Proview Shenzhen and/or Yoke Technology to deal in the China Trademarks.  His Lordship then gave directions for filing of evidence and adjourned the Summons for substantive hearing.

C. THE PRESENT HEARING

22.  The substantive hearing then came before me.

23.  Yang purported to file an affirmation for and on behalf of himself and Proview Holdings on 30 July 2010.  That affirmation was affirmed outside Hong Kong before a solicitor of Hong Kong.  It is clearly inadmissible : see Top Flying Investment Ltd v Open Mission Assets Ltd [2006] 4 HKLRD 83, per Recorder McCoy, SC at paragraphs 30–32.  B&M pointed out the deficiency to Yang’s solicitors but no attempt had been made to rectify the defect.  Effectively, neither Proview Holdings nor Yang has placed any evidence before me.

24.  As noted, Yang was adjudicated bankrupt on 2 August 2010.  Apple and IP Application had obtained leave to proceed against him on 10 November 2010.

25.  By letter dated 20 June 2011, Proview Holdings, through its solicitors, indicated that it would not object to the orders sought against it insofar as they relate to it.

26.  What remains for my determination is the outstanding application against Yang.  He is now acting in person.  He did not appear at the hearing.

D. DISCUSSION

D.1. The applicable principles

27.  They have become well established since American Cyanamid Co. v Ethicon Ltd [1975] AC 396.  In brief, the plaintiff must show that :

(1) there is a serious question to be tried in respect of the claim;

(2) the plaintiff will suffer irreparable damage if no injunction is granted;

(3) the defendant will not suffer irreparable damage if the injunction is granted; and

(4) if (b) and (c) are not conclusive, on a proper consideration of the balance of convenience or balance of justice, an injunction shall be granted.

These requirements are discussed in turn below.

D.2. A serious question to be tried

28.  The causes of action that Apple and IP Application rely on are as follows.

D.2.a. Breach of the Agreement by the Contracting Defendants

29.  There is clearly a serious question to be tried that the Contracting Defendants have acted in breach of the Agreement in that they had wrongfully refused to honour their obligation to assign the China Trademarks to IP Application.

D.2.b. Unlawful means conspiracy

30.  In a claim of conspiracy, the plaintiff must prove the following elements :

(1) a combination or agreement between two or more individuals;

(2) an intent to injure;

(3) pursuant to which combination or agreement and with that intention certain acts were carried out;

(4) resulting in loss and damage to the plaintiff.

See Bullen & Leake & Jacob’s Precedents of Pleadings 15^th Edn, Vol. 2, at paragraph 50–01.1.

31.  A combination to effect a breach of contract is an actionable conspiracy.  A party to the conspiracy can liable even if he is not a party to the contract and even where it was not possible to establish that he had procured any breach of it, but where he had merely combined, with a common design, together with the parties committing the breach.  See Clerk & Lindsell on Torts 20^th Edn, at paragraph 24–103.

32.  A company, being a separate legal person, can conspire with its directors; and the knowledge of the company may be found in a director who has management or control for the transaction or act in question. SeeClerk & Lindsell on Torts 20^th Edn, at paragraph 24–93; Belmont Finance Corporation v Williams Furniture Ltd and others (No. 2) [1980] 1 All ER 393.

33.  Here, the conduct of all the defendants demonstrate that they have combined together with the common intention of injuring Apple and IP Application by acting in breach of the Agreement.  Proview Holdings, Proview Electronics and Proview Shenzhen, all clearly under Yang’s control, have refused to take any steps to ensure compliance with the Agreement so that the China Trademarks are properly assigned or transferred to IP Application. Instead, they attempted to exploit the situation as a business opportunity for the Proview Group by seeking an amount of US$10,000,000 from Apple.

34.  Yoke Technology inferentially participated in the conspiracy by acting as the transferee of the China Trademarks under the reported transfer applications referred to in paragraph 17 above.

35.  Yang’s participation in the conspiracy can be inferred from among other things, the following matters :

(1) as the chairman and chief executive officer of Proview Holdings and the responsible person and director of Proview Electronics and as the legal representative, general manager and chairman of both Proview Shenzhen and Yoke Technology, he had at the material time management and control over them; and

(2) he had knowledge of the Agreement entered into by the parties in December 2009.

36.  It is plain that the defendants had the necessary intent to injure Apple and IP Application and their conduct will cause damage to them.

37.  Accordingly, I am satisfied that there is clearly a serious question to be tried for the claim of conspiracy.

D.2.c. The China Trademarks held on trust

38.  A contract for valuable consideration to transfer a subject matter passes a beneficial interest by way of property in that subject matter if the contract is one of which a court of equity will decree specific performance and the vendor becomes in equity a trustee for the purchaser of the subject matter.  See Palmer v Carey [1926] AC 703, at pp.706–707; Lewin on Trusts 18^th Edn, at paragraphs 10–03 to 10–10.

39.  In performing of the Agreement, IP Application had paid £35,000 for the Subject Trade Marks (including the China Trademarks) on 23 December 2009.  It is plainly arguable that the circumstances of the present case are such that the court may order specific performance if IP Application succeeds in its claim for breach of contract.  There is accordingly clearly a serious question to be tried that Proview Shenzhen now holds the China Trademarks on trust for Apple and IP Application.

D.2.d. Breach of trust and dishonest assistance

40.  The general requirements of liability for dishonest assistance are that :

(a) there exists a trust;

(b) to which there is a breach of trust by the trustee of that trust;

(c) that the defendant induces or assists that breach of trust; and

(d) the defendant does so dishonestly.

See Lewin on Trusts, 18^th Edn, at paragraphs 40–09, 40–14, 40–15, 40–17 to 40–19, 40–21 to 40–23; Royal Brunei Airlines SDN. BHD. v Philip Tan Kok Ming [1995] 2 AC 378, at pp.384D–385D, 386G–391D, 392F–H.

41.  There is clearly a serious question to be tried that each of these requirements are made out in the present case :

(a) there exists a trust by reason of the matters set out in Part D.2.c above;

(b) Proview Shenzhen has acted in breach of trust by reason of its refusal to transfer and assign the China Trademarks;

(c) other defendants have induced and/or assisted in Proview Shenzhen’s breach; and

(d) such inducement and/or assistance is dishonest.

D.3. Irreparable damage to Apple and IP Application

42.  Apple has launched and marketed its iPads worldwide, including, in particular, in Mainland China.  It is accordingly important that it is able to secure and obtain the China Trademarks.  It can do so only if the China Trademarks are not disposed of by the defendants pending the determination of the present case.  If the defendants are not restrained and are able to dispose of the China Trademarks, they will clearly suffer irreparable damage.

D.4. No irreparable damage to the defendants

43.  On the other hand, there will be no damage or harm caused to defendants if they are restrained from not disposing of the China Trademarks pending the resolution of the dispute between the parties.

D.5. Balance of convenience

44.  It is well established that one important factor in the balance of convenience is preservation of the status quo.  The grant of the injunctions sought against the defendants will serve to preserve the status quo pending trial without causing any real loss or damage to the defendants.  But as noted, if no interim injunctions are in place, and the defendants are at liberty to dispose of the China Trademarks before trial, Apple and IP Application will suffer irreparable damage, even if they succeed at the end of the day.  The balance of convenience is clearly weighed heavily in favour of granting the relief sought.

E. CONCLUSION

45.  For the above reasons, I made an order in terms of paragraphs 1, 2, 3 and 4.2 of the Summons insofar as they relate to Proview Holdings and Yang : see Appendix.

1.       Paragraphs 2, 3 and 4 of the Order of Deputy High Court Judge Carlson dated 2 June 2010 be continued until after the trial of this action or until further order.

2.       The 1^st, 3^rd and/or 5^th Defendants and each of them whether acting by themselves, their directors, officers, legal representatives, servants or agents or any of them be restrained from making any oral or written representation to any person(s) to the effect that they are, or any one of them is, the proprietor(s) and/or owner(s) of the IPAD trade mark (Registration No. 1590557, registered in Class 9 of the Register of Trade Marks of the People’s Republic of China) and the IPAD Stylised trade mark (Registration No. 1682310, registered in Class 9 of the Register of Trade Marks of the People’s Republic of China) (hereafter the “Subject Trademarks”) and/or have any title, rights and/or interests in the Subject Trademarks, and/or is in a position to sell, transfer, assign, otherwise dispose of and/or give good title to the Subject Trademarks.

3.       The 4^th Defendant whether acting by himself, his servants or agents or any of them or otherwise howsoever be restrained from procuring or authorizing the 1^st, 3^rd and/or 5^th Defendants to make any oral or written representation to any person(s) to the effect that they are, or any one of them is, the proprietor(s) and/or owner(s) of the Subject Trademarks and/or have any title, rights and/or interests in the Subject Trademarks, and/or is in a position to sell, transfer, assign, otherwise dispose of and/or give good title to the Subject Trademarks.

4.       An order that :

          4.1     …

4.2     the 1^st and 4^th Defendants do within 3 days of the personal service upon them of the order to be made hereunder take all steps necessary to procure the withdrawal of the Transfer Applications (as defined in paragraph 4.1) by the 3^rd and 5^th Defendants.