MIELE & CIE. KG AND ANOTHER v. INSTANT SERVICES (HONG KONG) LTD AND ANOTHER

HCIP 31/2022

[2024] HKCFI 2105

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 31 OF 2022

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REASONS FOR JUDGMENT

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1.  In this Action, the Plaintiffs claim against the Defendants for passing-off, trade mark infringement and copyright infringement. In the hearing on 31 January 2024, I granted summary judgment in favour of the Plaintiffs for the passing-off claim, trade marks infringement claim and part of the copyright infringement claim. I now give my reasons.

2.  The 1^st Defendant, which is a limited company, had all along been legally represented in the present Action until 14 November 2023. Shortly before the hearing, the 2^nd Defendant has obtained leave from the Practice Master to represent the 1^st Defendant. In breach of an unless order dated 13 December 2023, the 1^st Defendant has been debarred from filing any evidence in opposition to the present summary judgment application.

3.  In respect of the 2^nd Defendant, he had also been legally represented until 25 September 2023 when he filed a Notice to Act in Person. Although the 2^nd Defendant was in breach of the same unless order, I granted the 2^nd Defendant relief from sanction, and as a result he is entitled to rely on his affirmation as evidence in opposition to the present application. For the purpose of the substantive hearing, the 2^nd Defendant has also lodged a detailed written submissions, the format of which is very similar to those written submissions prepared by legally qualified advocates.

4.  The Plaintiffs belong to the well-known Miele group of companies (“Miele Group”). Since 1899, Miele Group has carried on global business in developing and marketing a wide range of home appliances under the “Miele” brand, including its variations such as “” and “” (collectively “Miele Marks” and “Miele Products”). Such products have been available in Hong Kong since 1997 at the latest. The 2^nd Plaintiff is the authorised exclusive wholesale distributor of the Miele Products in Hong Kong.

5.  Miele Group has made extensive use of the Miele Marks and has achieved numerous awards in respect of the Miele Products over the decades. In this application, the Plaintiffs have adduced substantial evidence demonstrating the goodwill and reputation of the Miele Marks in Hong Kong. The Defendants do not dispute the goodwill and reputation enjoyed by the Plaintiffs. Further, on the basis of the Plaintiffs’ claim, the 1^st Plaintiff is the registered proprietor of various Miele Marks in Hong Kong and the owner of the copyright subsisting in various artistic and literary works relating to the Miele Products and the marketing and promotion thereof.

6.  The 1^st Defendant carried and still carries on business in, inter alia, importing and marketing in Hong Kong parallel imports of European branded home appliances, including the Miele Products. The 2^nd Defendant is and was at all material times the director of the 1^st Defendant.

7.  In this Action, the Plaintiffs are not complaining about the sale of parallel imports of the Miele Products by the Defendants per se. What the Plaintiffs complain is the way the Defendants carried on such business. According to the Plaintiffs, the Defendants have made various misrepresentations leading the public to mistakenly believe that they were the authorised dealer of the Miele Products in Hong Kong, that the parallel products they marketed enjoyed “original warranty” by the Miele Group, and that the Defendants were somehow connected or authorised by the Miele Group. In particular, the Defendants had misleadingly stated and used the 2^nd Plaintiff’s registered office address and email address as the 1^st Defendant’s address, making the public believe that, contrary to the fact, they are related to the Miele Group.

8.  Further, the Plaintiffs claim that the Defendants have also, without authority, reproduced a large number of copyright works relating to the Miele Products, including photos, renderings and product descriptions, on the websites and social media accounts to create the false impression that they are and were authorised dealers of the Miele Products in Hong Kong. Such reproduction of the copyright works, according to the Plaintiffs’ case, infringes the 1^st Plaintiff’s copyright.

9.  In respect of the trade marks infringement claim, the Plaintiffs claim that the Defendants have extensively used the Miele Marks in promoting their business. On the basis of the Plaintiffs’ claim, there were a number of scenarios which show that such use was not in accordance with honest commercial practices, especially in light of the various misrepresentations made by the Defendants with reference to the Miele Marks.

10.  The legal principles governing summary judgment applications are trite and I do not intend to repeat the same here. In the following part of this Judgment, I will give my reasons as to why the Defendants have failed to establish an arguable defence, or indeed any defence, to the Plaintiffs’ respective passing-off, copyright and trade marks infringement claims.

The passing-off claim

11.  The elements for establishing passing-off claim, often known as the “classic trinity for passing-off”, are trite: goodwill, misrepresentation and damage.

12.  There is no question about the Plaintiffs’ goodwill in Hong Kong. Substantial evidence has been produced by the Plaintiffs in this regard. The Defendants do not dispute the goodwill and reputation enjoyed by the Plaintiffs. In fact, as pointed by Mr Wong, counsel for the Plaintiffs, since part of the Defendants’ business has been to market parallel imports of the Miele Products from overseas to Hong Kong, it is inherent in the Defendants’ case that the Miele Products and the Miele Marks must have enjoyed substantial reputation and goodwill in Hong Kong.

13.  I also agree with Mr Wong that there is overwhelming evidence showing that the Defendant have made various misrepresentations in the course of their business.

14.  First, the Defendants made misleading statements to the effect that the parallel imports they marketed would enjoy “original warranty” provided by the Miele Group:

(i)  The unchallenged evidence before the court is that the Miele Group’s “original 1-year warranty” does not cover products purchased from non-authorised channels (including parallel imports). Accordingly, any parallel imports of the Miele Products marketed by the Defendants (who have never been the Plaintiffs’ authorised dealers) would not enjoy any “original warranty” provided by the Miele Group. The Defendants have not adduced any evidence showing the contrary apart from making a bare assertion that such products do enjoy “original manufacturer’s warranty” provided by the Miele Group. Such bare assertion must be rejected in light of the evidence produced by the Plaintiffs.

(ii)  Despite the above, the Defendants misleadingly stated on their websites that the Miele Products they marketed “come with 1-year warranty by the original manufacturer”, and that they marketed “brand new, genuine products with original warranty pre-packaged by the manufacturer” and in Chinese “我們只銷售由製造商預先包裝並附有原始保用的全新正品” (“Warranty Claim A”). Warranty Claim A appeared on the Defendants’ websites from a date unknown to the Plaintiffs up to around January 2022. As pointed out by Mr Wong, the word “manufacturer” can only mean the Miele Group. Accordingly, the Defendants were misleading members of the public that the Miele Products they marketed would enjoy warranty provided by the Miele Group, which suggests, contrary to the truth, a commercial connection between the Defendants and the Miele Group. As stated in §21(8)(v) of the Defence, the Defendants have conceded that in fact those products only enjoyed warranty provided by the 1^st Defendant.

(iii)  The Plaintiffs’ solicitors issued a cease and desist letter to the Defendants on 15 November 2019 and requested the Defendants to, inter alia, remove Warranty Claim A. Despite such warning, the Defendants only replaced Warranty Claim A at least a year afterwards at the earliest. The Defendants replaced Warranty Claim A with the words “with original 1-year warranty” (“Warranty Claim B”). Despite such revision, I agree with Mr Wong that the word “original” plainly means that the warranty was to be provided by the “original” manufacturer, i.e. the Miele Group. Accordingly, Warranty Claim B still suggests a commercial connection between the Defendants and the Miele Group, which remains untrue and misleading.

(iv)  More importantly, in providing the particulars of the service centre on the Defendants’ website, the Defendants had deliberately stated the 2^nd Plaintiff’s registered office address as the address of the service centre of the 1^st Defendant, and had deliberately stated the 2^nd Plaintiff’s email address as the email address of the 1^st Defendant. This is clear misrepresentation that the 1^st Defendant is part of or is otherwise commercially connected with the Miele Group. The 2^nd Defendant explained this by suggesting that this was an “inadvertent error” committed by an “unidentified ex-IT freelancer”. Such allegation is plainly incredible because in between the 2^nd Plaintiff’s address and the 2^nd Plaintiff’s email address, someone had deliberately inserted the 1^st Defendant’s own contact number therein. So the 2^nd Plaintiff’s registered office address and email address (which features the word “Miele”) must have been deliberately stated on the page. Further, the 2^nd Defendant has completely failed to adduce evidence explaining how the error could have arisen, and the name of the alleged “ex-IT freelancer” who allegedly made the mistake. In any event, even if the misleading information was put up “inadvertently”, this does not absolve the Defendants from being liable for passing-off.

(v)  Further, as pointed out by Mr Wong, the Defendants also used and displayed the Miele Marks and Miele Group’s copyright works alongside the above Warranty Claim A and Warranty Claim B. In some of the individual product pages on the Defendants’ website, the Defendants had a section of “Manuals and Documents” with hyperlinks to, inter alia, the Plaintiffs’ original warranty conditions on the 1^st Plaintiff’s United Kingdom website, which terms are, of course, not applicable to the parallel imports marketed by the Defendants.

15.  Second, the Defendants made misrepresentations to create a false impression that they are one of the authorised dealers of the Miele Products, or that their business was approved, authorised or connected with the Miele Group:

(i)  Apart from the representations as to warranty as mentioned above, the use of the 2^nd Plaintiff’s registered office address and email address (which feature the word “Miele”) plainly suggested that the Defendant were commercially connected with or somehow authorised by or related to the Miele Group.

(ii)  The Defendants have also referred the 1^st Defendant as “Miele” on their website. It was stated that “We are the only manufacturer in our branch of industry to test products…”. The “manufacturer” clearly refers to the Miele Group, and the Defendants were suggesting that they were part of the Miele Group. It was further stated on the website that “Our dynamic cooling system create uniform distribution of temperature…”. The Defendants were clearly referring to the dynamic cooling system of the Miele Group. In the Defence[1], the Defendants contended that such phrases were “copied” mistakenly from the phraseology used by the 1^st Plaintiff, which certainly is an admission to copying. Even if that was true, this does not provide a defence to the passing-off claim.

(iii)  The Defendants also falsely claimed that they sourced the Miele Products “directly from Europe with wholesale prices” and there are “no distributors or dealers involved in the process”. In essence, the Defendants are suggesting that they sourced the Miele Products directly from the Miele Group, which is plainly false. In other words, the Defendants are suggesting that they are one of the authorised dealers of the Miele Products.

16.  The present case shares similarities with the facts in Omega v New Bowling v New Bowling Watch Co Ltd[2]and Aktiebolaget Volvo v Heritage (Leicester) Ltd[3]. All of these cases concern traders which try to impress the customers by falsely suggesting that they are authorised dealers of the products and that the products they sold would enjoy warranty by the original manufacturer. For the products involved in this case, i.e. expensive home appliances products, it is common sense that consumers always prefer warranty and maintenance services to be provided by the original manufacturer rather than a mere retailer (let alone an unauthorised retailer). That is why the Defendants have to mislead members of the public that the parallel imports of the Miele Products marketed by the Defendants would enjoy warranty provided by the Miele Group, and they are somewhat connected with or endorsed by the Miele Group.

17.  The Defendants have not demonstrated any triable defence to the above misrepresentations, except to barely assert that the misrepresentations were mistakenly or inadvertently made. However, this is only bare assertion, which is not particularized or supported by any evidence (such as how the error came about and who made the error). In any event, as pointed out by Mr Wong, even if there is evidence on how and from whom the error came about, passing-off does not depend on the intention of the guilty party. If the effect of the Defendants’ representation would mislead and deceive, it matters not whether such representation was inadvertently made.

18.  In the hearing, the 2^nd Defendant submits that there was no misrepresentation in the present case. In some of the sales brochures and press releases, the Defendants stated that they sourced the products in Europe and directly imported the same to Hong Kong. If there was any maintenance issue, the customers were told to contact the warranty provider or the manufacturer but not the “dealer” (i.e. the Defendants). The Defendants have also tried to avoid any possible confusion by including a disclaimer in their website (in particular in their HKTV mall website) by stating that their products are “genuine parallel import item[s]”. Similar defence has also been pleaded in the Defence.[4]

19.  However, these statements and the alleged disclaimer cannot eliminate any likelihood of deception or confusion in light of the misrepresentations mentioned above. In particular, the Defendants had made various misleading statements to the effect that the parallel imports they marketed would enjoy “original warranty” provided by the Miele Group, and that they are one of the authorised dealers of the Miele Products or that their business was somewhat approved or authorised by or connected with the Miele Group. Indeed, the alleged disclaimer was only added on the website in or around November 2020 which was one year after the Plaintiffs’ solicitors had issued a cease and desist letter to the Defendants. Hence, the disclaimer cannot provide the Defendants with a defence.

20.  Finally, damage will naturally follow as a result of the Defendants’ misrepresentations. In particular, if any customers are not satisfied with the Defendants’ performance or after-sale service (including in particular warranty), they would lose confidence on the Miele Group as they were under the mistaken belief that, contrary to the fact, the Defendants were somehow authorised by the Miele Group or that the maintenance and warranty service was provided or authorised by the Miele Group.

21.  For the above reasons, there is no arguable defence to the Plaintiffs’ passing-off claim.

The copyright infringement claim

22.  For the purpose of this application, the Plaintiffs rely on 19 representative examples of the copyright works, which can be categorised into 4 groups, namely promotional photographs, product renderings, product descriptions and product specifications. In so far as the product photographs, renderings, product descriptions and product specifications are concerned, I agree with Mr Wong that the information set out in the 1^st Affirmation of Mr Lam Cho Yan, Kenny (“Lam”) dated 8 June 2023 satisfies the requirements set out in s 121 of the Copyright Ordinance (Cap 528) to trigger the presumption provided therein.

23.  Thus, the burden lies squarely on the Defendants to rebut the statutory presumption provided under s 121 in respect of these works. Further and in any event, the onus is also on the Defendants to discharge the burden under O 14 application to condescend upon particulars and show a triable issue on copyright subsistence and ownership in respect of all the works.[5]

24.  However, the Defendants have done neither of them. The Defendants have completely failed to adduce any evidence to challenge the subsistence or ownership of the copyright. In his affirmation[6], the 2^nd Defendant only made a bare assertion that “… they are not copywrite (sic) photos of Miele to the best of my knowledge…” and suggested that the product descriptions do not attract copyright protection. The 2^nd Defendant has not provided any legal or factual basis in support of those assertions. In respect of the former, the 2^nd Defendant does not even state where the Defendants have copied those photos from and whom they allege to own the copyright subsisting therein. In respect of the latter, it is trite that copyright can subsist in product descriptions as a form of literary works (compilation of information). I agree with Mr Wong that the Defendants have plainly failed to rebut the statutory presumption or discharge the burden under O 14 application.

25.  There is no question that the infringing works found on the Defendants’ website and social media accounts are blatant copies and copies of substantial parts (if not identical) of the Plaintiffs’ copyright works. There is also no dispute that the Defendants have reproduced those works and making them available and communicated them to the public on their website and social media accounts. In fact, the Defendants claimed to have removed some of them, thus suggesting that they were indeed reproduced and made available on the websites and social media accounts.

26.  Reproduction and making available and communicating to the public are all primary infringing acts which do not require knowledge. In any event, it is plain that the Defendants have copied from the Plaintiffs’ copyright works and so the Defendants cannot possibly be said to be innocent infringers. Indeed, as pointed out by Lam in his 2^nd Affirmation dated 8 January 2024, some of the infringing works still remained accessible by the public on the Defendants’ website and social media accounts as of 2 January 2024.

27.  Under such circumstances, the Defendants have not demonstrated any triable defence to the copyright claim.

The trade marks infringement claim

28.  The 1^st Plaintiff is the registered proprietor of various Miele Marks in Hong Kong in Classes 7, 11, 20 and 37 covering various home appliances and the relating maintenance and installation services. The validity of these trade mark registrations is not in dispute.

29.  There is also no dispute that the Defendants have used the Miele Marks (identical to the registered marks) on the Defendants’ website and social media accounts in relation to the goods and services in respect of which the Miele Marks are registered in Hong Kong.

30.  The only question is whether the Defendants have any defence to such use. In the Defence[7], the only pleaded defence is s 20 of the Trade Marks Ordinance (Cap 559)(“TMO”), i.e. exhaustion of rights.

31.  S 20 of the TMO provides a party with a defence in so far as he or she is dealing with a product on which a trade mark has been applied by the owner or with his consent. However, the Plaintiffs are not complaining about the use of the marks on the parallel imports of the Miele Products, but rather on the Defendants’ unauthorised use of the Miele Marks on the Defendants’ websites and social media accounts in promoting the Defendants’ business. The Plaintiffs have never consented to such use and therefore cannot have “exhausted” the rights. The s 20 defence is not applicable here.

32.  In his written submissions, the 2^nd Defendant has also raised an unpleaded defence under s 21 of the TMO, which provides that the use of the registered trade marks should not be regarded as infringing if it is for the purpose of identifying the goods or services of those of the owner of the registered trade mark. Such defence only applies if the use is in accordance with honest practices in industrial or commercial matters.

33.  Even if the 2^nd Defendant is permitted to rely on unpleaded defence in an O 14 application, it is clear that the Defendants’ use of the Miele Marks cannot be said to be in accordance with honest practices.

34.  The use of a trade mark will not be regarded as in accordance with honest practices if it was objectively misleading to a substantial proportion of the reasonable audience, and if it was so misleading, then the use of the mark in the advertisement would be an unfair advantage taken of the distinctive character or repute of the notoriety of the mark.[8] Further, the use of a trade mark which is calculated to cause confusion in the minds of customers and the belief that there is some trading or commercial connection or relationship between a defendant and the trade mark owner cannot be considered as use in accordance with honest practices in industrial or commercial matters, and would constitute trade mark infringement.[9]

35.  As pointed out above, the Defendants’ use of the Miele Marks is part of their scheme to mislead members of the public that they are authorised by the Miele Group, or that they are part of or related to or are otherwise commercially connected to the Miele Group. In addition, the Defendants made false representations suggesting that their service centre was located at the 2^nd Plaintiff’s registered office address, and that the Defendants were using the 2^nd Plaintiff’s email address. This again was for the purpose of misleading members of the public that the parallel imports of the Miele Products they marketed would enjoy the same warranty as the Miele Products purchased from an authorised source. In fact, if one looks at the Defendants’ website, the extensive use of the Miele Marks plainly created such false impression. Such deceptive use cannot possibly be regarded as honest practice.

36.  Further, the extensive and unauthorized use of the Miele Marks also plainly took unfair advantage of the reputation of the Miele Marks. They serve to create a false impression that the Defendants are authorised dealers and sources for marketing the Miele Products. They also serve to create a false impression that the maintenance and warranty services are “original” and provided or authorised by the Miele Group.

37.  As submitted by Mr Wong, such use of the Miele Marks would also be detrimental to the distinctive character and repute of the marks. In particular, as pointed out by Lam in his affirmations, the Defendants were convicted of some product safety-related criminal offences relating to the sale of the Miele Products under various legislations governing the sale of electrical products. This would create damaging effect on the reputation of the Miele Marks if the Defendants sell or circulate in Hong Kong Miele Products that do not adhere to Hong Kong’s product safety legislation or if the public wrongly associated the Defendants as related to the Plaintiffs or as authorised dealer of the Miele Group. Further, the Miele Group has no control on the quality of the maintenance and warranty services provided by the Defendants in relation to the Miele Products. If anything goes wrong with such services, this will reflect badly on the reputation of the Miele Marks. Hence, the Defendants’ use of the Miele Marks cannot be said to be in accordance with honest practices in industrial or commercial matters.

38.  For the above reasons, the Defendants have not demonstrated any triable defence to the trade marks infringement claim.

Liability of the 2^nd Defendant as joint tortfeasor

39.  The 2^nd Defendant was at all material times the sole director of the 1^st Defendant until 31 March 2022. On 31 March 2022, an additional director was appointed, but there is no evidence that such additional director was in any way involved in the 1^st Defendant’s business or decision making. The 2^nd Defendant has since 3 August 2023 become the sole director of the 1^st Defendant again. Further, the 2^nd Defendant is and was all along the majority shareholder of the 1^st Defendant. As submitted by Mr Wong, there can be little dispute that the 2^nd Defendant was the alter ego of the 1^st Defendant and he controls and controlled the business activities of the 1^st Defendant, including the acts complained of in this Action. Whilst the 2^nd Defendant made bare denials that he was not so involved, he has not been able to identify any other officer in the 1^st Defendant responsible for such acts. The 2^nd Defendant had also been the person giving instructions on behalf of the 1^st Defendant in this Action.

40.  Given that the burden lies on the 2^nd Defendant to show a triable defence, the 2^nd Defendant has clearly failed to discharge the burden.

41.  In the hearing, the 2^nd Defendant has asked the court to allow him to file further evidence as to why he himself should not be liable as a joint tortfeasor. Given the history of this case, in particular he had been legally represented in these proceedings until September 2023 and he had already obtained the court’s indulgence once for failing to comply with an unless order, the 2^nd Defendant should not be allowed further indulgence in this case, otherwise it would be unfair to the Plaintiffs. I therefore rejected his application in this regard.

42.  For the above reasons, I granted summary judgment against both Defendants.

43.  I also allowed the Plaintiffs to obtain an order for additional damages against the Defendants under s 108(2) of the Copyright Ordinance. Taking into account the flagrancy of the infringement, the benefit accruing to the Defendants by reason of the infringement, and the length of time taken by the Defendants to respond to the Plaintiffs’ demand to cease the infringing acts, this is a case which warrants the award of additional damages against the Defendants. I therefore so ordered.

44.  Costs should follow the event and so I awarded the costs of this Action incurred up to the date hereof including the O 14 application to the Plaintiffs. To avoid further delay and complications arising from a full taxation, in particular the Defendants are not legally represented, I agreed with the Plaintiffs to do a summary assessment here.

45.  The Plaintiffs claim total costs in the sum of over $1.8 million. In my judgment, the total amount claimed is excessive. However, taking into account the defences put forward by the Defendants and the amount of works and papers that need to be done and prepared for the case, I summarily assessed the Plaintiffs’ costs in the sum of $1.35 million.