THE GARDEN CO LTD v. SMART YEAR LTD

HCA640/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 640 OF 2009

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BETWEEN

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REASONS FOR JUDGMENT

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1.  This is the plaintiff’s application for summary judgment against the defendant for infringement of trademark and passing off. At the conclusion of the hearing, I granted the application. My reasons appear below.

The plaintiff

2.  The plaintiff is a company incorporated in Hong Kong in 1947. It has a long history dating back to 1926 of being engaged in the manufacture and sale of food products, including breads, cakes, biscuits, snacks and candies. It is a substantial and well-known food production corporation in Hong Kong.

The plaintiff’s goods and its mark

3.  The present action concerns the plaintiff’s candy product (“the plaintiff’s Candies”) sold and marketed under and/or by reference to the mark “利是” (“the Mark”). The term “利是” means lucky money in the Cantonese dialect. The evidence adduced by the plaintiff shows that the plaintiff’s candies have been referred to as “利是糖” in Chinese (“Lucky Candies” in English) by the public.

4.  The Mark has been registered in Hong Kong in Class 30 in respect of candies. The registration date is 8 March 1979 and it is still valid and subsisting.

5.  The plaintiff’s Candies have been sold and marketed in distinctive packaging that comprises a red background with the words (including the Mark) printed in gold colour.

The plaintiff’s goodwill and reputation

6.  It is the plaintiff’s case that since 1977, it has continuously and extensively sold, marketed and promoted in Hong Kong the plaintiff’s Candies.

7.  The evidence before the court, which is not challenged by the defendant, is that the plaintiff has throughout the years extensively promoted and advertised the plaintiff’s Candies in Hong Kong. There has been at the same time substantial sales of the plaintiff’s Candies over the years. In the period between 1 April 2004 and 28 February 2009, the sales were approximately HK$ 45 million, involving the sale in Hong Kong of some 200 million pieces of the plaintiff’s Candies in the plaintiff’s get-up.

The defendant

8.  The defendant is incorporated in Hong Kong in 1999. It imports and sells candies in Hong Kong. It is the sole agent of candies (“the defendant’s Candies”) sold under and/or by reference to the sign “利是” (“the defendant’s Sign”), and contained in red packaging with gold writing. Among its retail network are supermarket chains of JUSCO and CR Vanguard.

The claim

9.  In January 2009, the plaintiff discovered that JUSCO was marketing the defendant’s Candies in packs that disclosed the defendant as the sole agent of the product. A cease and desist letter was sent to the defendant. The defendant did not agree to give an undertaking not to further deal with the defendant’s Candies, to disclose the extent of sale of the defendant’s Candies and to deliver up the defendant’s Candies. At the same time, the plaintiff continued to find the defendant’s candies being offered for sale in supermarkets.

10.  On 6 March 2009, the plaintiff issued the writ herein, claiming injunctions against infringement of trade mark and passing off, delivery up of the defendant’s products for delivery, disclosure and damages.

11.  In a nutshell, the plaintiff’s case in infringement of trade mark is that the defendant’s Candies and/or the defendant’s Sign are identical and/or confusingly similar to the plaintiff’s Candies and/or the Mark. In respect of the passing off claim, the plaintiff further says that the defendant’s Candies make use of a product packaging that is virtually identical or confusingly similar to the plaintiff’s get-up; and the typography of the sign used on the defendant’s Candies is confusingly similar to the typography adopted for the Mark.

The defence

12.  The defendant does not dispute the validity of the Mark. The main defence against both causes of action is that there are many differences between the Mark and the defendant’s Sign as well as between the parties’ respective products. Hence, they are neither identical nor confusingly similar.

13.  In respect of the claim in passing off, although the Defence does not admit the goodwill and reputation of the plaintiff, in the summary judgment application, the defendant makes no challenge to the plaintiff’s evidence on this aspect.

Order 14 application

14.  There is no disagreement on the general principles relating to summary judgment. Mr Ho in his submission referred to the case of Burmah Castrol Chemicals Limited v. Wong Fu & Co Ltd [1992] 1 HKC 287 and also passages in Hong Kong Civil Procedure 2009 vol. 1 paras.100/3/13 and sought to argue that the court should not grant summary judgment given that the Defence raises issues of identicality of the Mark and the defendant’s Sign and the likelihood of confusion.

15.  In Burmah Castrol Chemicals Ltd, the product marketed by the issue between the parties is whether the defendant’s mark “Thiolex” so nearly resembles the plaintiff’s mark “Thioflex” as is likely to deceive or cause confusion in the course of trade. Godfrey J (as he then was) considered that the defendant has a defence, the strength or weakness of which must depend on an evaluation of the evidence and which cannot be assessed in proceedings under Order 14.

16.  I do not read the case as deciding that whenever a defence on identicality or similarity or likelihood of confusion is raised, the court must refrain from giving summary judgment: see for example, Kui Fai Yuen Limited v. Reputation Limited, unreported, HCA 3743 of 2003 (26 January 2005), para.45. In my view, much depends on the facts of the case. Ultimately, the court has to see whether the defence raises triable issues of fact or law. If it does, then the matter should proceed to trial. If it does not, the court will enter judgment summarily.

Infringement of trade mark

(A)  Section 18(1) & (3) of Trade Mark Ordinance

17.  I deal firstly with the claim in infringement of trade mark. The plaintiff relies on both sections 18(1) and 18(3) of Trade Mark Ordinance, cap.559. The sections provide:

“(1)  A person infringes a registered trade mark if he uses in the course of trade or business a sign which is identical to the trade mark in relation to goods or services which are identical to those for which it is registered.”

“(3)  A person infringes a registered trade mark if-

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

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

18.  It should be noted that under section 18(1), if a defendant’s sign is identical to the registered trade mark and he has used the sign in relation to goods that are identical to those in respect of which the plaintiff’s trade mark has been registered, there is no need to consider likelihood of confusion.

19.  As a matter of law, a sign is considered to be identical with a trade mark where it reproduces, without any modification or addition, all the elements constituting the trade mark or where, viewed as a whole, it contains differences so insignificant that they may go unnoticed by an average consumer: Kerly’s law of Trade Marks and Trade Names, 14^th edition (2005) para.9-019; Guccio Gucci SPA v. Cosimo Ludolf Gucci, unreported, HCA 1582 of 2008 (31 July 2009) paras.51-55 and Richemont International SA v. Da Vinci Collections (HK) Limited, unreported, HCA 204 of 2006 (7 July 2006) paras.16-27.

20.  As for section 18(3), infringement of trade mark occurs where a defendant uses a sign that is similar to the trade mark in relation to goods that are identical or similar to those for which it is registered and the use of the sign in relation to those goods is likely to cause confusion on the part of the public. As to similarity with the trade mark and the question of likelihood of confusion, a summary of the relevant principles was set out by Kitchin J in Julius Samaan Ltd v. Tetrosyl Ltd [2006] FSR 43, 51, and adopted in Guccio Gucci SPA v. Cosimo Ludolf Gucci, at para.79. For the present purpose, it suffices to highlight the following:

(1)  The likelihood of confusion must be appreciated globally, taking account of all the relevant factors.

(2)  The visual, aural and conceptual similarities of the marks must be assessed by reference to the overall impressions created by the marks bearing in mind their distinctive and dominant components.  The perception of the marks in the mind of the average consumer plays a distinctive role in the overall appreciation of the likelihood of the confusion.

(3)  The average consumer normally perceives a mark as a whole and does not proceed to analyze its various details.

(4)  There is a greater likelihood of confusion where the earlier trade mark has a highly distinctive character, either per se or because of the use that has been made of it.

(5)  The average consumer rarely has the chance to make direct comparisons between marks and must instead rely upon the imperfect picture of them he has kept in his mind.  The average consumer’s level of attention is likely to vary according to the category of goods in question.

(B)  Identicality

21.  The central plank in the defendant’s case is that there are differences between the Mark and the defendant’s Sign. The differences were pleaded in the paragraph 6 of the Defence and repeated in paragraph 9 of the affirmation in opposition. They fall into three categories:

(1)  The two Chinese words “利是”.

(2)  The packaging of individual candy.

(3)  The packaging of the bag / pack containing the candies.

22.  In respect of the last category of differences, it can be readily put to one side as being irrelevant to the question in issue.

23.  As for the other categories, the defendant says that the Mark and the defendant’s Sign use different font style and layout for the words “利是”. In the Mark, the word “利” is on top of the word “是” such that the two words appear vertically. In the defendant’s Sign, however, the word “利” is placed next to the word “是” such that the two-word term appears horizontally. The two words in the defendant’s Sign are of a more regulated font style with the strokes being thicker. The defendant also says that the word “是” in the defendant’s Sign is written differently from that in the Mark. It is suggested that the word “是” in the Mark is not a recognizable form of Chinese writing. Additionally, it is said that the individual packaging of its candies uses a different shade of red colour and that the number of golden decorative lines on the borders are different.

24.  All these differences do not detract from the basic and fundamental fact that the defendant’s Sign uses exactly the two words that comprise the Mark. Conceptually and aurally, the defendant’s Sign is identical to the Mark. The differences identified by the defendant are trivial and insignificant. First, whether the two-word term is placed in a vertical or horizontal form is immaterial. What is of significance is that, in both the defendant’s Sign and the Mark, the two words are put together to form the term “利是” and to convey the same meaning of “luck money”. Conceptually they are identical. Second, the two words are in generic fonts, the difference in font style is both minor and of no significance.

25.  As for the argument that the word “是” in the Mark is not a recognizable form of Chinese writing, it simply cannot withhold scrutiny. What the defendant seeks to argue is that the stroke in the top part of the word “是” (i.e. “曰”) in the Mark is written vertically whereas in conventional Chinese writing (and also in the defendant’s Sign) the stroke should be written horizontally. The defendant therefore argues that the plaintiff should give evidence to prove that this is the same as the word “是” and absent such proof, the word is for the present purpose a word unknown and cannot be pronounced. However, the evidence before the court, including media reports and internet blogs, shows that the general public has recognized and referred to the plaintiff’s Candies as “利是糖”. This demonstrates that the general consumers have no difficulty identifying the word “是” in the Mark.

26.  In relation to the background colour and the decorative borders on the wrapping paper, the differences are hardly noticeable for an average consumer of candies.

27.  In my view, all the elements that constitute the Mark are present in the defendant’s Sign. Further, the differences, when viewed as a whole, are so insignificant that they will go unnoticed by an average consumer. The defendant’s Sign is therefore identical to the Mark. Since it has been used in the course of trade in relation to goods which is identical to those for which the Mark is registered (i.e. candies), a case of section 18(1) infringement is thus made out.

28.  Alternatively, the defendant’s Sign is confusingly similar to the Mark. In the first place, they both comprise the same two Chinese characters “利是”. Conceptually and aurally, they are the same. Secondly, as noted above, the differences in the font style or size and the background colour and decorative borders of the packaging are so insignificant that the visual impact and overall impression they give are virtually or substantially the same. Indeed, it is unrealistic to expect an average consumer of candies will be attentive to such minor details. He is more likely to perceive the mark as a whole. In this regard, the facts that the defendant’s Sign uses the same two words “利是” and is applied to the same type of goods are important, having regard to the distinctive character of the Mark and the use that has been made of it since 1977. It must also be borne in mind that for an average consumer of candies, he will almost always rely on his imperfect recollection or mental impression of the Mark and/or the goods since he rarely has the opportunity to make direct comparison.

29.  Although similarity and confusion is a question of fact, in light of the overwhelming circumstances in the present case, the defendant has not been able to show any triable issue. Mr Ho had in his submission referred to a paragraph in Hong Kong Civil Procedure 2009 vol. 1 para.100/3/4 and argued that the plaintiff had not adduced any survey evidence of consumers to support a case of confusion. But as the paragraphs that follow show, such evidence has little or no weight where the goods in question are not specific products.

30.  In short, the defendant has no arguable defence to the claim in infringement of trade mark, whether under section 18(1) or section 18(3) of Trade Mark Ordinance.

Passing off

31.  I turn next to the claim in passing off. I turn next to the claim in passing off. There is no dispute as to relevant legal principles. In Reckitt & Colman Products Ltd v. Borden Inc & Ors [1990] RPC 341, 406, Lord Oliver set out the three elements of the cause of action as follows:

(1)  A goodwill or reputation attached to the goods or services which the plaintiff supplies in the mind of the purchasing public by association with the identifying get-up (whether it consists simply of a brand name or a trade description or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognized by the public as distinctive specifically of the plaintiff’s goods or services;

(2)  A misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff; and

(3)  The plaintiff suffers, or in a quia timet action that he is likely to suffer, damages by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff.

32.  On the first element of goodwill or reputation, although the defendant does not admit the goodwill and reputation of the plaintiff, it has not led any evidence to contradict the plaintiff’s case on this. As noted above, there is before the court overwhelming evidence that the plaintiff enjoys substantial reputation and goodwill in the plaintiff’s Candies. It is also of importance to note that the defendant has not denied having knowledge of the plaintiff’s goodwill in the Mark and/or its get-up when it began to market the defendant’s Candies.

33.  As to the second element of misrepresentation leading to deception or confusion, it is common ground it involves the same consideration and factors for assessing the issue of likelihood of confusion under section 18(3) of Trade Mark Ordinance. It has also been observed that where two identical marks are used in connection with identical business and on identical goods, with one of the marks enjoying a pre-existing reputation, confusion and deception is bound to result: Chelsea Man Menswear Limited v. Chelsea Girl Limited [1985] FSR 567, 571-2; [1987] RPC 189, 194; and MGA Entertainment Inc v. Yokon International Limited, unreported, HCA 4380 of 2003 (8 December 2006), at paras.60-61.

34.  Having regard to the analysis and findings on the issues of identicality of the Mark and the defendant’s Sign and of likelihood of confusion under section 18(3) of Trade Mark Ordinance, there can be no doubt that the second element is met.

35.  On the third element of damage, the defendant argued that there is no evidence of damage and further contended that since the Mark is well-known and the plaintiff’s Candies has a long history in Hong Kong, it would cause less confusion. I cannot agree. It is a matter of inference that damage will follow if there is likelihood of confusion and deception. And as the authorities have shown, given that the Mark enjoys a high reputation, the likelihood of confusion will be higher: see Sabel BV v. Puma AG [1998] RPC 199, 224 and applied in Guccio Gucci SPA v. Cosimo Ludolf Gucci, at para.79(f).

36.  On the claim in passing off, no triable issue of defence has been raised.

Conclusion on the application

37.  For the reasons above, I am satisfied that the defence has not raised any triable issue both in relation to the claim in infringement of trade mark and the claim in passing off. Accordingly, the plaintiff is entitled to summary judgment. I therefore enter judgment for the plaintiff as claimed.

Costs

38.  There is no dispute that the normal rule of costs follow event should apply such that the defendant should pay the plaintiff the costs of the action, including the costs of this application.

39.  Additionally, the plaintiff seeks to have part of its costs on an indemnity basis, relying on Order 22, rule 24(3) of Rules of the High Court.

40.  In brief, what happened was: By letter from its solicitors dated 20 April 2009, the plaintiff made a sanctioned offer to settle the entire action on terms that include: (i) judgment be entered for paragraphs (1) to (4) of the Statement of Claim (which excludes claims for damages and account of profits); and (ii) costs of the action on party-and-party basis. Upon the defendant’s solicitors’ request, the plaintiff’s solicitors provided a statement of the plaintiff’s costs (totaling $95,895) on 11 May 2009. The sanctioned offer was not accepted and it expired on 18 May 2009. Thereafter, the plaintiff issued the summons for summary judgment.

41.  By letter dated 3 July 2009, the defendant’s solicitors made a without prejudice offer to settle the action (inclusive of costs) by executing a letter of undertaking and paying $70,000. Prior to the commencement of this action, the plaintiff’s solicitors had written to the defendant and demanded it to execute a letter of undertaking, which the defendant did not agree to do. The letter of undertaking that the defendant offered to execute in the letter dated 3 July 2009 was an adoption of the letter of undertaking provided by the plaintiff, but with deletions. The deletions relate primarily to undertakings to refrain from acts of passing off in the future, delivery up of the defendant’s remaining stock of the infringing products for destruction and making discovery on oath. The plaintiff’s solicitors replied by letter dated 10 July 2009, making a counter-offer. The defendant did not respond.

42.  Under Order 22, rule 24(1) and (3), where (a) a defendant is held liable for more than the proposals contained in a plaintiff's sanctioned offer; or (b) the judgment against a defendant is more advantageous to the plaintiff than the proposals contained in a plaintiff's sanctioned offer, the court may order that the plaintiff is entitled to costs on indemnity basis after the latest date on which the defendant could have accepted the offer without requiring the leave of the court.

43.  In response to the plaintiff’s application for costs after 18 May 2009 to be paid on indemnity basis, Mr Ho asked the court to exercise its discretion against making the order on the ground that the defence and the opposition to the summary judgment application were not totally devoid of merits. I am unable to agree that this affords a good reason for departing from the consequences of not accepting a sanction offer provided under Order 22. I also observe that the sanctioned offer of the plaintiff is a reasonable one whereas the defendant has not explained its refusal to give the various undertakings that it had deleted, including making discovery upon oath and deliver up the infringing articles, let alone shown that it is justifiable.

44.  I am of the view that the plaintiff is entitled to have its costs incurred after 18 May 2009 paid on indemnity basis. And I so order.

45.  The plaintiff asks for gross sum assessment of its costs and has lodged a statement of costs. Mr Ho submits that it is more appropriate to go for taxation so that with more details or breakdown of the items, the costs can be subject to closer scrutiny. I do not agree. This is a relatively straightforward case; there are not a lot of activities in the action and the amount of work and documents is not voluminous. It is in the interest of the parties, both in terms of costs and time saving, to have a gross sum assessment instead of undertaking the much more costly process of taxation.

46.  As for the amount of costs, the plaintiff’s statement of costs was initially in the sum of $304,680. As the hearing lasted shorter than scheduled, the plaintiff had revised the total amount to $273,880. Having studied the statement of costs, I am of the view that deductions should be made to reflect the following matters:

(1)  Item A4: Hourly rate

For the post-18 May 2009 period, the hourly rate is based on charge-out rates of the fee earners, which is a higher rate.  However, the hourly rate that is generally allowed by the court on taxation does not only apply to party-and-party taxation, but also applies to taxation on indemnity basis: see Re Peregrine Investments Holdings Ltd [2000] 1 HKLRD 157, para.21.  In the present case, there are no special circumstances for adopting rates higher than that normally allowed on taxation.  I note in particular that the claim is a straightforward one and the defence is neither evidentially nor legally complex.  Hence the hourly rate of CK, NM and CL is allowed at $4,000, $2,500 and $2,000 respectively, whether for the period before or after 18 May 2009.

(2)  Items C1 to C3: Communications

To reflect the revision to the hourly rates, the amount of costs should be assessed at:

Item C1:	CK	5.3 hours	@ $4,000	$21,200
	NM	5.5 hours	@ $2,500	$13,750
	CL	9.0 hours	@ $2,000	$18,000
Item C2:	CK	1.3 hours	@ $4,000	$ 5,200
	NM	0.8 hours	@ $2,500	$ 2,000
	CL	9.0 hours	@ $2,000	$18,000
Item C3:	CK	0.3 hours	@ $4,000	$ 1,200
	CL	1.5 hours	@ $2,000	$ 3,000
	Sub-total of Item C			$82,350

(3)  Items D1 & D2: Preparation and perusal of documents

The total time CL charged for preparation of documents and perusal of documents are 27 hours.  At the same time, CK and NM, who are more senior, also charged 3.9 hours and 4.7 hours respectively under these items.  This gives a total time of 35.6 hours.  The amount of documentation in this case is not that voluminous and the duration of the matter is about seven months.  It would appear there was a fair amount of overlapping and duplication of work among the three fee earners. Even recognizing that the costs relating to the Order 14 application is on indemnity basis, the amount of time is excessive. 4 hours of CL’s time is to be deducted.

(4)  Item D4: Hearing

The hearing of the summary judgment actually lasted for 1.75 hours. Allowing 30 minutes travelling time, the total time allowed for this item is 2.25 hours for CK and 3.45 hours (inclusive of 1.2 hours for hearing on 7 July 2009).

(5)  Items D1 to D4: Professional Work

Taking into the adjustments under (3) and (4) above and the revision to the hourly rates, the amount of costs should be assessed at:

Item D1:	CK	2.4 hours	@ $4,000	$ 9,600
	NM	3.5 hours	@ $2,500	$ 8,750
	CL	19.0 hours	@ $2,000	$38,000
Item D2:	CK	1.5 hours	@ $4,000	$ 6,000
	NM	1.2 hours	@ $2,500	$ 3,000
	CL	4.0 hours	@ $2,000	$ 8,000
Item D3:	CK	1.0 hours	@ $4,000	$ 4,000
	CL	3.0 hours	@ $2,000	$ 6,000
Item D4:	CK	2.25 hours	@ $4,000	$ 9,000
	CL	3.45 hours	@ $2,000	$ 6,900
	Sub-total of Item D			$99,250

(6)  Items E1 to E2: Miscellaneous

To reflect the revision to the hourly rates, the amount of costs should be assessed at:

Item E1:	CL	2.5 hours	@ $2,000	$ 5,000
Item E2:	CK	1.0 hours	@ $4,000	$ 4,000
	Sub-total of Item E			$ 9,000

47.  The total costs should therefore be assessed at HK$224,990, made up as follows:

Item B	$ 2,800
Item C	$ 82,350
Item D	$ 99,250
Item E	$ 9,000
Item F	$ 28,000
Item G	$ 3,590
Total:	HK$224,990

Orders

48.  In summary, there will be judgment for the plaintiff as claimed in the Statement of Claim together with costs assessed at $224,990.