LAW YUNG MAN t/a EMMARCO INDUSTRAIES COMPANY v. CHUNG SHUI CHUNG t/a LUEN HOP COMPANY AND OTHERS

Action 1984, No. A5650

IN THE HIGH COURT OF JUSTICE

HONG KONG

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JUDGMENT

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1. In this case the Plaintiff claims breach of copyright by the Defendants in relation to drawings mock-ups and moulds related to two end products both of which are kitchen-ware; a gravy separator, one example is Exhibit LYM-11, and an oil well, LYM-12. It is an unusual case but not a difficult one. The Plaintiff claims that in relation to each of the articles in which he holds the copyright, it was breached by one or other of the Defendants. He claims that the 2nd Defendant reproduced the articles exactly either himself or through the services of the other Defendants.

2. The 1st Defendant was the manufacturer of the oil well and the 3rd Defendant, the maker of the mould for the gravy separator and the 4th Defendant was the maker of the mould for the oil well. So far as the gravy separator is concerned, it appears that the 2nd Defendant manufactured that himself.

3. In relation to the gravy separator, the Plaintiff's case is that for some time he had been in business in Hong Kong as a designer, export and seller of household and domestic utensils. One of his customers was an American firm called 'Hoan'. Arnie Gunar was the person with whom he dealt. He knew him as A.G. He had been dealing with Hoan since about 1976. 'The Plaintiff says that on 5th December 1980 he was on business in the United States and visiting Hoan and talking to A.G. The Plaintiff produced his passport to show he was in fact in the United States on that day. A. G. showed him a product. It was No. 1240 in his catalogue. A.G. said that he thought it had a big potential in the United States and he gave to the Plaintiff LYM-3, a gravy strain it was called in the States. It was simply a sample of an idea It was a jug with a spout which came from the bottom of the jug so the contents could be poured from the bottom rather than the top. This enables the oil or fat in gravy to be left in the jug when the true gravy was poured away. An examination of LYM-3 shows that it had in the States a registered design and a pattern number. According to the Plaintiff A.G. asked him to produce an article with the same idea but not with the same design because, of course, that would be an infringement. A.G. asked for some different samples of the idea and so the Plaintiff brought LYM-3 back to Hong Kong.

4. The Plaintiff's brother is a designer, draftsman and mould maker. It is clear from what I have seen that he is a designer and draftsman of considerable skill. The Plaintiff thought about the product and decided that he could improve it, and he communicated those ideas to his brother who added his own ideas. In due course he produced a mock-up, a new design of the same idea. The mock-up has since been lost. He also produced in due course a detailed design drawing and the sketch i.e. the sketch LYM-6; and the design drawing LYM-7. A mould maker who gave evidence was given the mock-up and eventually he produced a mould for the production of the article. The Plaintiff told me that it was his practice to put the serial number on his own products of his best customer and so he put onto this product Hoan's serial number 1240 because he had hopes of selling it to Hoan. In the mould which he had made there was a slot. The slot was for the purposes of inserting the logo of any particular customer so the mould when produced could reproduce articles with a logo. That logo could' be changed for another logo or the article could be produced without any logo. The product was very successful.

5. According to the Plaintiff the production of the oil well was also related to his business with A.G. In about March 1981 A.G. was here in Hong Kong. He brought to the Plaintiff's office a Japanese product which was called an oil well. That product, the exact one, has been lost but a similar one was produced in evidence; LYM-16. It is a container for oil and a holder for a spring-loaded brush which is normally held above the oil but which can be depressed into it. The brush is used for oiling cooking utensils. A.G. thought it was a good idea with potential and he wanted the Plaintiff to produce a new and possibly a better concept of the idea.

6. According to the Plaintiff he discussed the matter with his brother and within two days his brother produced a mock-up of their joint ideas. It is LYM-8. It was produced in 2 days because they wanted to show this product to A.G. before he left the Colony. When the Plaintiff considered the mock-up he decided that it would be better if it were slightly bigger and so he instructed his brother to make a drawing; a detailed drawing of a slightly larger version. In due course a mould maker was given the mock-up and the drawing. He produced moulds. The article was sold to the United States buyer in June from the mock-up, I believe, and the first delivery was in October. That is broadly the Plaintiff's case for he says that the Defendants reproduced articles in which he held the copyright.

7. The 2nd Defendant is the main defendant because he admits being the one who was producing these articles either himself or through others. He says quite the reverse; the idea, the form of the idea which has being shown here in Court, was his own idea, not the Plaintiff's; that he redesigned the very same gravy strain that was being produced in the United States; came up with the design which has been shown and it therefore is the Plaintiff who has reproduced his design. I will detail that more in the course of this judgment.

8. So far as the oil well is concerned, the 2nd Defendant says that he was given the very design by a friend of his who had been to the States in Aaugust 1980 and he decided to reproduce that design with a minor modification. It was the Plaintiff who also reproduced therefore a design introduced by the 2nd Defendant.

9. I turn briefly to the law. I say briefly because in this case little turns upon the law. Realistically, Mrs. Barnes who appears for the Defendants, had made a number of concessions. They were concessions which in my judgment were wise concessions and perhaps inevitable ones. If the Plaintiff makes out his case then it is conceded that he has the copyright in the various drawings mock-ups and moulds. It is conceded that the drawings, mock-ups and moulds are artistic works within the meaning of the Act. The drawings, of course, are drawings, the mock-ups are sculptures and the moulds are engravings See Section 48 of the Act. Those works were either unpublished or were published in places to which the Act applies (see Section 3(ii)(a) of the Act) and the author at all times was a qualified person. It is conceded that all the relevant parts of the Copyright Act 1956 applied to Hong Kong and the United States. It said that the Defendants reproduced in various ways both of the articles in a material form.

10. For the sake of completeness, I add that no argument has been addressed to me that there should be any restriction of "reproducing" within the meaning of Section 9(e) of the 1956 Act, as might have been suggested by the speech of Lord Griffiths in British Nylon v. Armstrong Patterns (The Times newspaper 28th February 1986). Had such an argument been addressed to me I would have not been accepted it. Any statement of principle which comes from Lord Griffiths has to be regarded with the greatest possible respect, but his reasoning emasculates this part of the Act and he was in a minority. It is further conceded correctly by Mrs. Barnes that the works concerned are original works within the meaning of Section, sub-section 2 of the Act if the Plaintiff's account is accurate.

11. I turn now to consider the facts upon which the case turns for in the light of those concessions and the admissions of facts which appear in the pleadings, if the Plaintiff's case is correct then the Defendants are in breach This is not a case in which the two cases advanced by the Plaintiff and advanced by the Defendants can stand together. This is not a case where it would be possible for them to have achieved independently the same and exactly the same design for one of these articles. If they had achieved exactly the same design and manufacture of moulds for two articles, it would be nothing short of a miracle. The case for the Plaintiff and the Defendants therefore cannot stand together, the inevitable conclusion is that one side is lying. One side has produced a false case backed up by forged documents.

12. Which case do I accept? In considering that question I bear in mind certain things. I bear in mind that the burden of establishing the case is on the Plaintiff. I bear in mind that I must consider the case in respect of each of these articles separately. It would of course be surprising if the Plaintiff was correct about one of the articles and lying about the other, but that is a possibility I must bear in mind. Finally where witnesses have given evidence through the interpreter it would be unsafe for me to decide the case upon their demeanour. Having considered the evidence in this case with some care, the Plaintiff and his witnesses on one hand and the evidence called by the Plaintiff on the other, I am convinced that the account given by the Plaintiff in respect of both these matters is correct and truthful. I am not going to rehearse the whole of the evidence given by each party, that is a matter of record, but of course I will indicate the reasons for this decision.

13. I am satisfied on the evidence that the Plaintiff had been dealing with Hoan, his American customer, for some time before 1981, probably he had dealt with him for some years. I am satisfied that the Plaintiff was in the States in December 1980, having seen his passport. I am satisfied that Hoan, his customer, had been marketing the American version of the gravy separator; that appears in Hoan's catalogue which has been produced. It appears under the number 124-O, This catalogue was Hoan's 1981 catalogue printed some time in 1980. This is where the number 1240 later found to be engraved upon both the Plaintiff's and the Defendants' moulds came from. The connection between Hoan and this product was through the Plaintiff. It is logical, if A.G. of Hoan came to the conclusion that this was a product with potential, that one of the persons whom he would approach and whom he would know was equipped to redesign and produce a product would be the Plaintiff. When the Plaintiff said that LYM-3 was the product given to him by Hoan, I accept that. He said that he was given this on the basis that any exact copy would be an infringement in the United States and that is why he set out to redesign it. I accept that. The views which the Plaintiff pressed about the design of LYM-3 and the ways in which he thought it could be altered and improved are also ones which are logical and acceptable. He said first that he did not think the handle on LYM-3 was suitable in this respect, he thought if a housewife were to take hold of the handle, she was in danger of burning her hand if it contained very hot gravy. Also, he saw that the aperture at the base of the spout was too restricted for pouring gravy and he thought that could be improved. I should add that the Defendants' version of the American gravy strain had a rather larger aperture so it would appear that the models varied in some degree. But the one the Plaintiff had was restricted and he thought he could improve it, and so he discussed the matter with his brother to produce a new design with his own ideas.

14. Events which follow are important, because I have considered what would be expected of a man in the Plaintiff's position; a salesman, a manufacturer; and a man in his brother's position; an able designer and draftsman. What steps would they take in order to produce a new design?

15. The steps which they took were those which could be expected in such circumstances. The brother first produced a rough sketch, LYM-4, the Plaintiff considered this and rejected it, he didn't like the handle. So the brother produced LYM-5, the Plaintiff liked the handle. The brother had used that design of handle because there was already a mould in existence for such a handle, but the Plaintiff didn't like the spout and so he was asked to improve that. So he eventually produced LYM-6. The Plaintiff approved and liked that, so he asked for further drawing; a drawing to scale showing the dimensions. It was thus that LYM-'7 was produced. The Plaintiff approved it and asked for a mock--up. The brother then made the mock-up and. that having been examined the Plaintiff set about having a. mould made. Those steps are logical, they are steps which could be well expected in these circumstances and I accept those steps were taken. The mould was made from the mock-up. Further drawings and the elaborate ones for mould malting were requested by the Plaintiff from his brother. Those were used for the Plaintiff's business record. After the moulds had been tested, the moulds were further engraved with the Hoan's serial number and they had the logo inserted. All this account is supported by documents which are signed and dated, and there are receipts from the mould maker. The Plaintiff and his brother do not give precisely the same account as to the dating and signing of those documents. This is not a matter which shakes my conviction that they are telling the truth. It is just the sort of variation of detailed memory that one would expect after this time.

16. That account is to be contrasted with the account given by the 2nd Defendant. He says about the beginning of 1930, his friend, Mr Ching from Taiwan, was going to the States and the 2nd Defendant asked this friend to bring some good kitchen-ware products back for his reference. In August 1980 the 2nd Defendant says, Mr Chino produced two, the gravy separator and the oil well. The gravy separator being exactly similar to LYH-3 save for the aperture at the base of the spout and the oil well being exactly like the one said to have been produced by the Plaintiff save it was made of slightly thicker plastic. This gentleman from Taiwan had never done anything for the Defendant before and it appears that he had done nothing for him since. Whether that strange character who came into this case exists or not, I don't know. But it is a strange circumstance. accepting for the moment that is what happened, the 2nd Defendant also wanted to redesign the gravy strain to improve it and to avoid the infringement problem. He got it in August 1980, he then spent some five months thinking about it, (he says) deciding upon the viability of such a product in business and in costing it. This is the way that he approached the matter. When he decided to go ahead with an improved design he first wanted to redesign the handle. The reason he gave was that it was not strong enough if it held heavy contents. That reason I am unable to accept. I don't believe that it is necessary for me to have expert engineering or other evidence to help me about it. One look at that article and the handle and feel of it leads any person as a matter of common sense to the conclusion that that handle is quite strong enough to hold any contents that could be put into that gravy strain; so I reject that as being an honest reason for him wanting to redesign. Then the design that he chose, he said, came from a cup which was on his desk and he wanted the handle copying. As to the web between the body of the gravy strain and the spout, he thought that was superfluous and ought to go, and he thought that a half square shape would be better and would look nicer. He described the half square shape as being one square with the corners cut off - the shape which is in fact part of the design of the article in dispute. How did he set about producing his new design? He made a sketch dated the 2nd February (a significant date) which is produced TTW-1. He called in his mould maker and he explained to his mould maker what he wanted done after his five months' contemplation. He told the mould maker that he wanted it produced approximately as in the sketch. He wanted to alter the handle into approximately the shape of the cup. He said the thickness of the handle was to be moderate. The spout was to be half square shape and the words written in Chinese characters which were said to be illegible on the sketch, he said were "stream-lined making nicer looking". He explained to Mr Ho, the mould maker, what he wanted and he said that he didn't give him any detailed measurements. He told Ho to formulate the alteration according to the rough idea. The plastic was to be about 3 mm thick as he says in his sketch. He says that he trusted Mr Ho and Mr Ho had done this for him before.

17. I accept that it would be possible for a mould maker to take a rough sketch to apply to it his own ideas of measurements and to produce a mould which could in its turn be used to produce an article. But anyone who is spending money and indeed a great deal of time upon having a mould made would not be in his right mind if he simply gave the mould make the ideas to formulate himself without having a scale drawing so that he could see what the article was to be like or at least without having a mock-up made so that he could consider the design. The design process described by the 2nd Defendant in relation to this article is bordering on the fantastic. In my judgment no businessman would undertake the design of an article for sale as he did.

18. His account of the way in which his mould achieved the No. 1240 is feasible. He says that having got the samples out of his mould he took them to the Plaintiff and he wanted the Plaintiff to sell the article for him. This being now his design. He says that the Plaintiff asked him first, not to show the article to anyone else because he might be able to find a buyer, he wanted it exclusively. So the matter was left like that for a little time, then the 2nd Defendant says the Plaintiff approached him and said 'Please put this number on the mould. '. The clear inference of that being that he had a market. The 2nd Defendant was also asked to put a logo on the mould, but he refused. All the could have happened. It would be surprising if he refused to put the logo on the mould and that there was not some discussion between the two of them on the lines of the 2nd Defendant saying to the Plaintiff 'Well, my mould doesn't have the facility or slot for logo, if you care to pay for the conversion, then we can put the logo on for you. Nothing like that was suggested throughout the conversation described by the 2nd Defendant.

19. Then the 2nd Defendant describes how it came about that he personally decided to scratch out the number on his mould. He says he decided to do that because a customer of his didn't want the number on. That I simply do not accept. There is no reason why a serial number of manufacture in Hong Kong should not appear on an article. Almost every article that is manufactured has some number or other on it, some of which may be a manufacturer's number. I don't accept what he says. It goes further than that because the result of his scratching out the number left an unattractive scar on the bottom of the product through which the number was visible. If the 2nd Defendant had a manufacturer who wanted the number removed he would have had the number removed in a perfectly orthodox way by a mould maker who could have simply removed it leaving the end product unaffected. Finally his account that he waited for very long time allowing the Plaintiff time to try to sell the article became impatient and decided to sell the articles himself; it is unacceptable, I find, that he would have done that without some discussion with the Plaintiff of his intention. I bear in mind that he was visiting the Plaintiff very frequently in the course of business, he says not as frequently as he had done before but still frequently.

20. So, I reject the 2nd Defendant's account of the manufacture of that mould and in relation to his drawing. I also reject the account given by the 3rd Defendant. I should add that I have considered what he said in support of the 2nd Defendant, but having considered that and having heard the way in which he described designing this new product it is an account which I reject.

21. Let me turn to the oil well.

22. Again, the Plaintiff's account of this matter is logical and consistent. A.G. was here in Hong Kong on a business trip. He produced an article like LYM-16, and wanted it improving. The Plaintiff saw it and he decided the idea was very good but he had his own ideas for its improvement. He says that he thought the shape could be improved by dividing the design into three. A third at the top, a third at the bottom and the coloured centre. He thought it could be improved by having a screw top for security and he thought that the Japanese design with a spring and metal plate which entered the oil was not as hygienic as it should be. There was some urgency. He wanted to make a sale and so he asked his brother to put his ideas into a mock-up LYM-8. That was produced in two days and shown to the customer who liked it, but the Plaintiff thought it would be better if a little bigger. There was some difficulty when the mock-up was tried out in relation to the flow of oil. The mock-up shows that the plate at the base of the brush was different from the final product. It was something to do with the way in which the oil flowed, so the brother was asked to do a scale drawing -rather larger than the mock-up with some modification and he produced LYM-9. LYM-9 shows a significant design development It can be seen on Part VI of the drawing LYM-9. That detailed drawing was a necessary step in the production of an article such as this which was a much more complicated article than the gravy strain separator. The mould maker would not have been able to make a mould from the mock-up above because the mock-up was not quite the right size and was not correct (see the part shown in Part VI of LYM-9). So the mould maker was given LYM-9 and the mock-up and he produced the moulds. Later he was shown the Japanese version because some problem had been encountered in relation to the spring. That account of these two very able people using their skill in order to produce a new concept of an idea is logical; it develops in proper sequence; it uses the correct skills and I am satisfied that account is correct.

23. So far as the 2nd Defendant is concerned, he says Mr Chan came back from the States with an oil well of exactly the same design as shown in LYM-9 but not the same design as in the Plaintiff's mock-up. According to the 2nd Defendant he gave it to him to reproduce. It was a final product but it was made of slightly thicker plastic. I am not able to accept that there was a product like the Plaintiff's oil well on sale in the United States in August 1980. If there had been such a product, I would have expected there to be some evidence of that. Evidence at the very least of a document or a catalogue. I said at the very least because Mr Chan was not called, I don't take that in any way against the Defendants, there are many reasons why a witness who lives abroad may not be called, but investigations, I believe, would have produced, the article or a representation of the article, if such had been on sale in the States. The account given by the 2nd Defendant is that he is in breach of somebody's copyright but not the Plaintiff's.

24. The drawing (TTW-2) which the 2nd Defendant made for the mould maker was said to have been made so that the mould maker would not lose any of the parts. The mould maker was given the article to copy subject to minor variation. The account given by the 2nd Defendant that he produced this TTW-2 so that the mould maker wouldn't lose any of the parts, I think is simple nonsense. The drawing was made to bolster the false case.

25. Finally the 2nd Defendant's account of taking the oil well to the Plaintiff and acceding to his request not to show it or sell it to anyone else and finally deciding, after his patience ran out, to have it manufactured and to market it himself without further discussion with the Plaintiff, is one I entirely reject.

26. I am satisfied therefore that the Plaintiff is the owner of the copyrights in the articles he claims. I am satisfied that the 2nd Defendant set out to breach those copyrights and to reproduce them. He did so. He did so exactly. The breaches are blatant. The designs were taken exactly from the designs which had been produced originally by the Plaintiff or by those whom he had instructed.

27. I turn then to each of the Defendants. I need say little more about the 2nd Defendant, he was clearly the prime mover in all these matters. His evidence shows that I heard nothing from the 1st Defendant, the manufacturer of the oil well.

28. The 3rd and 4th Defendants both gave evidence, I am satisfied that the 3rd Defendant produced 2 receipts which he knew had false days upon them, he knew they were forged therefor. Those 2 receipts have consecutive numbers upon them although they were widely divided in time. I think it is most unlikely that those receipts were made in normal course of business in a book of receipts. The copies in the book itself were not produced.

29. So far as the 4th Defendant was concerned, it is just possible that he was duped having been given an article to copy. I am sure he was given an article to copy. It was an article produced by the Plaintiff. But on balance of probability I find that he was not duped. He knew he was giving evidence which was false so far as the date on this document D7 was concerned.

30. The relevance of all this is whether those Defendants other than the 2nd Defendant have any defence or partial defence to this action under Section 72 of the Act. None of them raise a defence under Section 72 of the Act. If it be thought that the 2nd and 3rd Defendants have raised-that in pare.3(b) of their defence, they do not. It is an ineffective pleading because they would have had to specify that they were not aware and had no reasonable grounds for suspecting that the copyright subsisted in the work. That is not argued on their behalf. So I have considered and I reject any defence under Section 72 of the Act in relation to any of the Defendants.

31. There will be judgment against the Defendants and each of them. I will now hear counsel upon any consequential orders and on the question of damages. In particular on any question of damages for a flagrant breath.

                 (Submissions heard. )

32. So far as the 1st Defendant is concerned, I order an inquiry, into damages in respect of the 1st Defendant's acts of conversion and an order for payment of such sum or sums as are found to be due.

33. There will be judgment against the 2nd Defendant in the sum of $319,845.00 with interest at the judgment rate as and when those damages arose in accordance with the admitted facts.

34. There will be judgment against the 3rd Defendant in the sum of $12,000.00 with interest at the judgment rate.

35. Judgment against the 4th Defendant in the sum of $27,600 with interest at the judgment rate from the date of the cause of the action.

36. There will be an order for the delivery up to the Plaintiff's solicitor of the oil well or gravy separator moulds held in the godown. The godown ought to be specified.

37. The injunctions are made permanently in the same terms and against the same Defendants.

38. I turn to the question of costs. There is an application for costs on a common fund basis. The reason is that the Plaintiff points to the manner of the defence in this case and to the decision which I have made about the dishonesty of it. In my discretion I should give weight to the manner in which that the defence has been prosecuted and there will be an order for costs against the 2nd Defendant on a common fund basis. Costs against the 1st, 3rd and 4th Defendants so far as there may be costs which the Plaintiff has incurred simply against them will be on a party and party basis.