MATTEL, INC v. DE LUXE MANUFACTURING LTD

HCA 9216/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9216 OF 2000

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R U L I N G

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1.  This is an application by the Plaintiff, Mattel Inc., to vary the costs order nisi that I made in my judgment dated 2 August 2004, when I dismissed its claim for trademark infringement and gave judgment in favour of the Defendant on its counterclaim for rectification of the Register of Trademarks by expunging from the Register the Plaintiff’s trademark “Kelly”.  In that judgment, I made an order nisi that the Plaintiff should pay to the Defendant the costs of the action to be taxed if not agreed.

2.  Ms Tam, who appears before me today on behalf of the Plaintiff and who also appeared for the Plaintiff at the trial, submitted that the Defendant should be deprived of a part of its costs of these proceedings.  In essence, her submission was that certain issues, which had been raised by the Defendant on the pleadings, were effectively abandoned at trial and as a result of these issues having been raised, certain additional costs and expenses were incurred.  In consequence it would be appropriate for the costs order in respect of the action to reflect the fact that unnecessary costs and expenses had been incurred by depriving the Defendant of some part of its costs.  Ms Tam suggested that a reduction in the order of 30 to 50 per cent would be appropriate.

3.  The action concerned the alleged infringement of the Plaintiff’s registered trademark “Kelly”.  At the trial, the focus of the argument was on the validity of the mark and I ultimately ruled that the mark was invalid because it was not registrable under section 9 of the Trademarks Ordinance (being of surnominal significance) and because it lacked inherent distinctiveness. 

4.  The Plaintiff, however, has submitted today that because of the Defendant’s failure to admit certain of the facts underlying the Plaintiff’s claim, the Plaintiff had to obtain evidence from one of its employees and from a private investigator with a view to proving those facts at trial.  The Plaintiff said this had proven ultimately to be unnecessary in the light of the fact that the issues which that evidence went to were not seriously challenged by the Defendant at trial. 

5.  The evidence in question went primarily to the question of whether or not, assuming that the mark had been valid, there had been any acts of infringement by the Defendant.  The Plaintiff pleaded in its statement of claim (in particular at paragraph 7) certain alleged acts of infringement.  These included dealing in the allegedly infringing products in Hong Kong, the specific sale of one item of the product to investigators employed by the plaintiff, and an admission, or a statement in a letter written by the solicitors then acting for the Defendant, to the effect that the Defendant had dealt in the products in Hong Kong.

6.  The Defendant in its defence denied this paragraph although it did go on to make certain averments by which it essentially averred that it had dealt in products by the name of “Sweetie Kelly” from a date in about mid 1998 for a period of some one and a half years and that the total sales of the product in question had amounted to some $2,000.

7.  While there is some force in what Ms Tam has submitted, in that these matters were not seriously disputed at the end of the day, it seems to me that the Defendant was, at the outset, entitled to take the stance of requiring the Plaintiff to prove all of its allegations, by putting the Plaintiff to proof of all elements of its claim.

8.  If the Plaintiff had wished to avoid having to produce evidence by which to prove these aspects of its claim, it seems to me that it would have been open to the Plaintiff to have served on the Defendants a suitably worded notice to admit facts in respect of any particular allegation for which the Plaintiff wished to secure admissions so as to avoid the necessity of having to provide evidence to substantiate its claim at trial.  However, the Plaintiff did not do this.  Had the Plaintiff adopted this course, it would have been entitled to recover from the Defendant, the costs of proving those facts at the end of the day in the event that those facts were established, or not contested by the Defendant. 

9.  In these circumstances, it seems to me that there is nothing inherently wrong in the Defendant having taken the course which it did, and that there was available to the Plaintiff a means by which it could have protected itself in relation to the costs of having to prove these matters which ultimately turned out to be largely academic. 

10.  It therefore seems to me that it would not be appropriate for me to vary the costs order nisi which I have made on this basis. 

11.  I would also act that at the end of the day, the amount of time spent on this issue at the trial was minimal and that, while there may have been some additional costs involved in preparing for trial in relation to this issue, the additional amount is, I think, not a matter that is likely to be of great significance.

12.  In the circumstances, I do not think that the costs of the proceeding have been increased to such an extent that it would be appropriate for me to exercise my discretion as to costs by depriving the Defendant of some part of its costs of its defence of the action.

13.  Finally, Ms Tam also made the point that had the issues in these proceedings being narrowed down at an early stage, as they could have been had the Defendant focused on the real issues in the proceedings, it would have been possible for the matter to have been resolved earlier.  The failure to do this, she said, caused detriment to the Plaintiff, because the failure to resolve the proceedings earlier had meant that invalidity of the Plaintiff’s mark, which on the face of it was a good one, was not discovered as early as it might have been, thus delaying the Plaintiff in taking steps to apply for a fresh registration of its mark, or in taking such other steps as the Plaintiff might have been advised to take in relation to its mark.

14.  That may be so, but it seems to me that unless there has been unreasonable delay in these proceedings, and I am afraid that I can see none, this is a risk that the Plaintiff has to take in relation to litigation of this nature.  The fact that the Plaintiff may be prejudiced in some respects by the way in which proceedings have taken their course does not, I think, justify the court in depriving the Defendant of part of its costs unless there is some basis on which it can be said that the Defendant has acted unreasonably in taking the course which it has adopted. 

15.  As I am satisfied that the Defendant has not acted unreasonably in its conduct of litigation, I decline to vary the order nisi which I made on 2 August 2004.