KPSS KAO PROFESSIONAL SALON SERVICES GMBH v. SOUTHERN GROUP LTD

HCA1452/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1452 OF 2005

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REASONS  FOR  JUDGMENT

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1. The plaintiff applied for summary judgment against the defendant to restrain the defendant from trade mark infringement and passing off.  I refused the application and granted unconditional leave to defend, with costs in the cause.  I now give reasons.

2. The plaintiff is a manufacturer of hair products, among them hair gels.  For such products, it owns two registered trade marks, “Goldwell (姬麗)” and “Trendline”.  There is no dispute that it sells and has sold products bearing these trade marks in Hong Kong and has acquired goodwill in respect of such products.

The plaintiff’s case

3. The plaintiff claims that the defendant infringed the trade marks and passed off goods sold by reference to signs identical or similar to the trade marks as and for the plaintiff’s goods.

4. For the purpose of infringement, the plaintiff pleads that the defendant used in the course of trade signs identical or similar to the plaintiff’s trade marks on goods in respect of which the trade marks had been registered.  By way of particulars, it pleads that on 7 August 2004 the defendant sold three bottles of hair gel, each with a label bearing signs identical or similar to its trade marks affixed thereon, to one Chan Fuk Sing trading as Kue Kee Company.

5. For the purpose of passing off, the plaintiff relies on the same particulars and says that given that the quality of the packaging, including the trade marks, applied to the plaintiff’s products is regarded by consumers as significant, the use of the infringing label, which is of inferior quality, interferes with the original packaging in a way inconsistent with the expectation of the customers.

6. The main complaint in the plaintiff’s evidence is that the label on the jars sold by the defendant was inferior.  There is no evidence that the contents of the jars were not genuine.

The defendant’s case

7. The defendant does not deny selling the jars of hair gel to Kue Kee.  In his first affirmation, its director, Mr Yeung, says that the defendant’s customers placed orders for the products and it sought them from different sources.  When obtained, the products would be checked to see if they had been disfigured, or the content used before, or if there was any error in wordings or logos on the packaging or labels.  Any dubious products would be rejected.  He had checked the products in the same way.  The defendant had sold three jars to Kue Kee, and has produced an invoice in support.

8. Mr Yeung further affirmed that the defendant’s defence was that it had treated the labels as identifying the goods as those of the plaintiff, and they were true representations of genuine products originating from the plaintiff.  Further, the defendant had never received any complaints from Kue Kee that it or its customers have been confused by the labels, and there have been no instances of alleged ‘inconsistency in expectation of customers’ known to the defendant as claimed in the Statement of Claim.

9. In a second affirmation, Mr Yeung said that the defendant had been buying from various sources, including the plaintiff’s authorised supplier, Sino Salon, since early June 1994.  He did not, however, produce any documentary evidence that the particular jars found with Kue Kee had originated from Sino Salon.  As appears from the plaintiff’s evidence, there is no dispute that Sino Salon is its authorised supplier although the plaintiff says that it terminated its relationship with Sino Salon in August 2004 “as we discovered that they sold the plaintiff’s products… to third parties without the authorisation of the plaintiff”.  Just what that means is not clear to me, given that the business of an authorised supplier is precisely to sell its principal’s products to third parties.

The goods and their labels

10. When one looks at the jar of hair gel exhibited as genuine by the plaintiff for these proceedings, as against the jar bought by the plaintiff’s investigator from Kue Kee, the differences are small.  The jars are the same size and shape, and the labels on the circumferences, made of clear plastic with white lettering in four European languages, are identical.  What is complained of is the lid labels.

11. The plaintiff’s lid label appears to be made of adhesive plastic and bears the plaintiff’s two trade marks (the “Goldwell” without the Chinese characters) against a light purplish-blue background.  The defendant’s lid label is made of paper and the shade of blue is somewhat different, but its appearance is otherwise identical.

12. The defendant’s label was taken off during the hearing.  It revealed another label, apparently painted on, and there are two areas of the background where the paint has been scraped down to the metal of the lid.

13. The plaintiff’s solicitor had indicated from the bar table, in the course of the hearing, that the scratch marks under the defendant’s label were intended to obliterate numbers, but, as the defendant’s solicitor pointed out there was nothing about this in the evidence.  After the hearing I also pulled off the plaintiff’s label.  It too revealed another label, apparently painted on the lid, and identical in appearance with that covered by the defendant’s label, except that two numbers had been scratched into the paint.  So no doubt what I was told from the bar table was correct; but the fact remains that there is no evidence as to the significance of the numbers and their obliteration.

14. There is no evidence concerning the contents of the jars.  There is, for instance, no chemical analysis.  We do not know if the contents are the plaintiff’s original hair gel, or that hair gel adulterated in some way, or something totally different.

15. There is also no evidence of any complaint by any retailer or end user, either about the quality of the contents, or the quality of the label.

Infringement

16. Infringement of trade marks is prohibited by section 18 of the Trade Marks Ordinance, Cap. 559, which provides :

“(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.

(2)     A person infringes a registered trade mark if—

(a)   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 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.

(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.

(4)     A person infringes a registered trade mark if—

(a)   he uses in the course of trade or business a sign which is identical or similar to the trade mark in relation to goods or services which are not identical or similar to those for which the trade mark is registered;

(b)   the trade mark is entitled to protection under the Paris Convention as a well-known trade mark; and

(c)  the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.

(5)     …”

17. As I have indicated, the plaintiff pleads that the signs on the offending labels were “identical or similar” to its trade marks.  I am not clear whether its case on the pleadings is that the defendant used signs which were :

(a)      identical to the trade marks in relation to goods which were identical to those for which the trade marks were registered (subsection (1)); or

(b)     identical to the trade marks in relation to goods which were similar to those for which the trade marks were registered (subsection (2)); or

(c)     similar to the trade marks in relation to goods which are identical or similar to those for which the trade marks were registered (subsection (2)); or

(d)     identical or similar to the trade marks in relation to goods which are not identical or similar to those for which the trade marks were registered (subsection 4).

18. However, in argument the plaintiff’s solicitor says that the purchasing public was likely to be deceived that the infringing items were the genuine goods or associated with or licensed or authorised by the plaintiff.  Presumably, therefore, the case is laid under either subsection (2) or (3), either of which requires proof that the use of the sign in relation to the goods is likely to cause confusion on the part of the public.

19. The defendant relies on the defence provided by section 21, as follows :

“(1)    Nothing in section 18 (infringement of registered trade mark) shall be construed as preventing the use by any person of a registered trade mark for the purpose of identifying goods or services as those of the owner of the registered trade mark or a licensee, but any such use which is otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark.

(2)     In determining for the purposes of subsection (1) whether the use is in accordance with honest practices in industrial or commercial matters, the court may consider such factors as it considers relevant including, in particular, whether—

(a)   the use takes unfair advantage of the trade mark;

(b)   the use is detrimental to the distinctive character or repute of the trade mark; or

(c)   the use is such as to deceive the public.”

Passing off

20. The elements of passing off are goodwill attaching to the products, misrepresentation by the defendant leading or likely to lead the public to believe that his goods are the goods of the plaintiff, and that the plaintiff suffers or is likely to suffer damage because of the misrepresentation.

The arguments

21. The defendant argues that there are triable issues both with regard to infringement and passing off.  With regard to infringement, there is a triable issue on whether the use of the label was against honest practices.  Further, the question of whether or not it is of inferior quality, and likely to confuse the public, is also a question of fact and may need expert evidence.

22. As to passing off, again the defendant says that the question whether the label is of inferior quality and likely to confuse the public is also a question of fact and may need expert evidence.

23. The plaintiff argues that there is no defence.  Even if the labels were applied to identify the goods as those of the plaintiff, it was not done honestly, and since the labels are of inferior quality that is detrimental to the distinctive character or repute of the trade marks.  So the defence in section 21 is not available.

24. It is also argued that the defendant’s evidence is deficient; the witness does not say, in terms, that the defendant bought this gel from Sino Salon, and not some other supplier; or that it did not itself interfere with the labels on the goods it bought.

25. The plaintiff further argues that in any event, even if the defendant did not know, as it alleges, that the goods were not genuine, lack of knowledge is no defence to infringement.

26. It is also suggested that even if the contents are genuine, the labels, which are of inferior quality, have impaired the condition of the products.  Reference is made to the case of Yardley v. Higson [1984] FSR 304, where bars of genuine Yardley soap, which the defendant had bought abroad, were sold in Britain without the maker’s original packaging and this was held to constitute passing off, on the basis that the wrapped and unwrapped soap bars were goods of different quality.

Discussion

27. I note that the defence in section 21 is primarily directed at advertising.  The learned authors of Intellectual Property Rights, Hong Kong SAR and Peoples’ Republic of China say at paragraph II [976.1] that it is primarily directed, but not restricted to comparative advertising and “it may also cover for example repaired or reconditioned goods of the proprietor”.

28. Perhaps my approach is unsophisticated, and it is true that I have no great experience of infringement or passing off cases, but it seems to me that the absence of any evidence that the hair gel was or was not the original hair gel made by the plaintiffs is an important factor.  As I have indicated, there is no such evidence.  The plaintiff’s witness seems to indicate that what the defendant sold was not genuine but that is as far as it goes.

29. Without knowing that the contents were not genuine, it is difficult to go further than suspicion, and say that the re-labelling must have been dishonest.  Obviously there is suspicion; if the contents are genuine, why would anyone scrape off the numbers and put on new labels?  On the other hand, why does the plaintiff itself scrape numbers on the lids, and cover them with adhesive labels in the first place?  Perhaps the answer is that the plaintiff itself puts new gel in old jars.  In any event the answer is not so obvious that dishonesty must be inferred.

30. As to whether the quality of the defendant’s labels is detrimental to the distinctive character or repute of the plaintiff’s trade marks, this seems to me far-fetched.  For my own part, I cannot see why the label should matter.  The customer gets a plastic stick-on label or a paper stick-on label with the same words and logos and in almost the same shade of blue.  One wonders if the average customer cares, one way or the other, what the label looks like, so long as the hair gel does what he or she expects it to do.  Perhaps the customer does care; perhaps they will buy the plastic label but will not buy the paper one; but I think that some evidence from customers that it mattered to them, rather than bare assertions by the plaintiff would be necessary to show detriment.

31. On passing off, much the same considerations apply.  We do not know whether the gel is genuine or not.  If it is genuine, there can surely be no misrepresentation and no damage flowing from misrepresentation.

32. It seems to me, therefore, that there are triable issues here, and this is not an appropriate case for Order 14.

33. As to costs, the normal order where unconditional leave is given is for costs in the cause.  The defendant sought to have the costs, on the basis that its solicitors had given notice beforehand of its defences and therefore the plaintiff knew of an arguable defence.  It is true that the defendant gave early notice of its defences, but there is, as I have indicated, suspicion of dishonesty here and further, it is noted that the plaintiff obtained summary judgment against the proprietor of Kue Kee.  It cannot be said that the plaintiff must have gone ahead without expectation of success.  In the circumstances I think that the usual order is the proper one.