XCHRX LA CHEMISE LACOSTE S.A. v. CROCODILE GARMENTS LIMITED

1995, No. A2401

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. On 1 May 1980, the parties to this action entered into an agreement. That agreement recorded that there had been "unhappy differences" between them that had resulted in litigation and trade mark opposition proceedings, and that they had negotiated the agreement to settle their disputes.

2. The agreement said that the defendant was the owner of a trade mark consisting of the word "Crocodile", the equivalent Chinese characters, and the representation of a crocodile. The agreement also said that the plaintiff had created and developed certain products known and sold throughout the world under the trade mark "Chemise Lacoste" or "Lacoste" together with an emblem prominently displayed on the products being also a representation of a crocodile. The defendant's crocodile is similar to that of the plaintiff, but is slimmer, is facing to the left, rather than the right, and its jaws are somewhat less widely open.

3. This agreement envisaged licence and distribution agreements, and the parties entered into such agreements.

4. More "unhappy differences" have arisen between the parties. The defendant has applied for the registration in the Trade Mark Office of the People's Republic of China (the PRC TM office) of certain trade marks that the plaintiff says are confusingly similar to its mark. These I will call the "registration marks". The plaintiff is opposing the registration in the PRC TM Office, and has commenced proceedings in this court to prevent this registration and seeking other relief.

5. The principal clause of the agreement relied upon by the plaintiff in the Hong Kong action reads as follows -

"Relation between the Parties outside Hong Kong

[The defendant] shall not apply for registration nor cause, enable or assist any third party to apply for registration of the [plaintiff's mark] or any trade mark confusingly similar with the [plaintiff's mark] in any part of the world outside Hong Kong save and except assistance rendered to [the plaintiff] at their prior request in writing, such prohibition applying to each and every kind of goods in any class."

6. The plaintiff alleges that the defendant has applied to register outside Hong Kong marks confusingly similar to the plaintiff's mark.

7. In its defence filed in these proceedings, the defendant quotes another clause of the agreement -

"Use of Trade Mark/Trade Name

[The defendant] undertakes not to use in Hong Kong any trade mark or trade name (including the [plaintiff's mark] in a manner likely to cause confusion between the products of or manufactured by [the defendant] (on the one hand) and products of or manufactured to the order of [the plaintiff] (on the other hand) except as according to the terms of the Distribution Agreement. [The plaintiff] agrees that per se the use by [the defendant] of a crocodile whether as a trade mark or as a trade name as it is represented in [the defendant's] registration no. 19/1954 does not cause such confusion."

8. The defendant says in its defence that the registration marks are substantially the same as the representation of a crocodile in registration 19/1954. It says that, in the premises, the plaintiff is estopped from contending that the registration marks cause confusion with, or are confusingly similar to, the plaintiff's mark. Further, or in the alternative, the defendant pleads that it is denied that the registration marks are confusingly similar to the plaintiff's mark whether in China or at all. The defendant says it is not in breach of the settlement agreement.

9. In its reply, the plaintiff denies the alleged estoppel, and says that the parties accepted, in effect, that the registration marks were confusingly similar to the plaintiff's mark. In alleging this latter point, the plaintiff says it will rely on the full terms, meaning and effect of the settlement agreement, the licence agreement and the distribution agreement, and the context of the litigation that gave rise to the agreements.

10. Another clause in the agreement reads -

"Law

This agreement shall be construed in accordance with the law of Hong Kong"

11. The defendant has now issued a summons asking for an order that all further proceedings in this action be stayed pending the determination of the oppositions filed, or to be filed, by the plaintiff in the PRC TM Office, and any appeal or appeals. The grounds upon which the stay is sought are -

(i) that the question to be decided by the PRC TM Office is whether the registration marks are confusingly similar to the plaintiff's mark;

(ii) that one of the questions to be decided in this action is whether the defendant is in breach of the settlement agreement by making the applications in China because the registration marks are confusingly similar with the plaintiff's mark in China;

(iii) that the two questions are identical;

(iv) that it is clearly more appropriate that the question of confusing similarity in China should be determined by the appropriate tribunal in China;

(v) that the plaintiff has applied for the determination of the question by the appropriate tribunal in China; and

(vi) that it is clearly and distinctly more convenient that the question be decided by the PRC TM Office.

12. The premise upon which the application for a stay is brought is, therefore, that the question, or, at least, one of the questions, awaiting determination by this court is identical to the question awaiting determination in the PRC TM Office. The summons seeking the stay says so, and, indeed, it would be difficult to see on what other basis a stay would be granted in a case such as this.

13. The first matter that arises for decision, therefore, is whether or not the questions for determination in the two tribunals are identical. If they are not, that is the end of the matter. Any other considerations do not come into play, and the defendant's application must fail.

14. The question before this court is whether or not the defendant is in breach of the settlement agreement. In order to determine that question, the court has to decide if the defendant has applied for the registration of a mark outside Hong Kong that is "confusingly similar" to the plaintiff's mark. In deciding this, the court has to consider whether the plaintiff is estopped, and the meaning and effect of the settlement agreement in the context of the surrounding circumstances, including all three agreements and the earlier litigation. It will make its decisions by applying Hong Kong law.

15. To understand the nature of the question to be decided by the PRC TM Office, it is necessary to examine the evidence of the experts.

16. The defendant has filed an affirmation by Ms Shi Xiaomei, who is an expert on the law and practice of trade mark registration in the People's Republic of China. She says that the law, as far as it is relevant here, is that the PRC TM Office shall refuse registration of a mark that is identical with or similar to another person's mark that has been registered or preliminarily approved. Ms Shi says that she has considered the oppositions filed by the plaintiff, and gives her opinion that "the Trademark Office will base its decisions in the oppositions strictly on whether the [registration mark] is confusingly similar with the [plaintiff's mark]".

17. The plaintiff's expert, Mr Hu Qi, has also filed an affirmation. He says he had been asked to consider Ms Shi's opinion mentioned immediately above. He says that his view is that the PRC TM Office will consider not only the matter of similarity, but also, as far as relevant here, whether the defendant obtained preliminary approval by unfair means "and, in particular, whether [the defendant] fully disclosed . . . the terms of the Settlement Agreement". He expresses the opinion that the PRC TM Office will consider the arguments put forward by the plaintiff in opposition, including the submission that the defendant is in breach of the agreement. Mr Hu says - "The PRC Trade Mark Office will be particularly interested in the final decision that the Hong Kong courts make in this Action as to whether that the PRC Applications in fact represent a breach of the Settlement Agreement." The PRC TM Office will, he says, consider the entire settlement arrangement, including the licence and distribution agreements entered into under the settlement agreement. He goes on to say - "If this Action is close to trial by that time [ The time for a decision by the PRC TM Office.], then a further delay may result as I believe that the PRC Trade Mark will clearly be interested in knowing the outcome of this Action before issuing a decision, if at all possible".

18. In response to this, another affirmation by Ms Shi was filed by the defendant . She says that, in her opinion, "the TMO will not give much weight in the opposition proceedings to the Settlement Agreement . . . or negotiations . . . in deciding whether there is confusing similarity . . . Contracts and agreements . . . shall not be adjudicated by the TMO or [the review board]". Ms Shi challenges Mr Hu's view that the PRC TM Office would be interested in the decision of this court. She is of the view that the PRC TM Office decision will be independent of the decision of any other tribunal.

19. There is, of course, a conflict of view here. Ms Shi believes that the PRC Office will have little regard to the settlement agreement. Mr Hu thinks that the Office will consider the agreements, particularly in the context of deciding if the defendant obtained preliminary approval by unfair means. What is reasonably clear from the evidence of both experts is that the PRC TM Office will not decide whether or not the registration marks should be registered only on the basis whether or not there has been a breach of the settlement agreement by the defendant . Ms Shi is clear in this. Mr Hu, although he seems to think that the PRC TM Office will consider the agreements, obviously believes that the Office will not decide on the question of the breach, otherwise he would not have expressed the belief, several times, that what would be of some influence in the decision-making process in the PRC TM Office is a decision by the Hong Kong courts on whether or not there was a breach. If Mr Hu believed that it was a function of the PRC TM Office to decide the question of the breach, any view that the Hong Kong court might have on this would not be relevant.

20. It is true, as Mr Scott points out, the plaintiff has raised in its opposition in the PRC TM Office the matters that this court would decide in this action. I do not know what the defendant's answer is to these points in the Office proceedings. The procedure of the Office does not provide for the plaintiff to see these answers, and the defendant has not supplied them voluntarily. In any event, the fact that the plaintiff has raised the same points in the Office proceedings does not mean, in the light of the experts' evidence, that the Office will make decisions upon them. The evidence is that it will probably not do so.

21. If there is any doubt on this point, it must be resolved in favour of the plaintiff. It is for the defendant to satisfy me, in the circumstances of this case, that there should be a stay.

22. Accordingly, I proceed on the basis that the PRC TM Office will not decide the question of whether or not the defendant is in breach of the settlement agreement.

23. What the PRC TM office will decide is whether the registration marks should be registered, and it will decide that question by the application of PRC trademark law and practice.

24. What this court will decide is whether the defendant is entitled to seek registration of the registration marks in the light of the meaning of the agreements, construed according to the surrounding circumstances and according to the law of Hong Kong.

25. These questions, in my view, are different. There is some similarity between them, but they are far from identical. The two tribunals will proceed to determine the question of similarity against the background of a different factual and legal matrix.

26. This conclusion may be tested by examining what effect a decision of the PRC TM Office would have on the Hong Kong proceedings.

27. If the PRC TM Office decides that the registration marks should be registered, and assuming that issue estoppel would otherwise operate against the plaintiff, the plaintiff would, in my judgment, be entitled to proceed with its action to establish a breach according to Hong Kong law because the PRC TM Office has not decided the issue between the parties in this action, but has decided only that, in terms of PRC law and practice, the registration marks are registrable.

28. If the PRC TM Office refuses the registration of the registration marks, some of the relief claimed by the plaintiff in the Hong Kong action may be unnecessary, but, assuming the defendant is in breach, the plaintiff may well be entitled to an injunction against other attempts to register the marks and damages.

29. So, in my view, whatever the PRC TM decides, that will not be determinative of the Hong Kong action.

30. This finding is sufficient to dispose of the matter, but I will express my views on the other aspects raised by the parties.

31. If it were so that issue before the PRC TM Office was identical to that to be decided by our court; that is, simply whether or not the registration marks were confusingly similar in the context of China, I would have found that the Office was a tribunal of competent jurisdiction to decide that matter.

32. The plaintiff is entitled, as of right, to commence proceedings against the defendant by serving it within the jurisdiction. I can deprive it of that right only if the PRC TM Office is "clearly and distinctly more appropriate" that the Hong Kong court. Once one accepts that the decision before the Hong Kong court involves the interpretation of agreements according to Hong Kong law in the light of the surrounding circumstances in Hong Kong and disputes and litigation in Hong Kong, it is very difficult, if not quite impossible, to come to the conclusion that a forum elsewhere is "clearly and distinctly more appropriate". Accordingly, if it were necessary, I would refuse the defendant's application of this ground also.

33. If I were of the view that the PRC TM Office was "clearly and distinctly more appropriate", I would not have ruled against the defendant on the grounds that my discretion should be exercised in favour of the plaintiff because otherwise it would lose significant personal and juridical advantages. There are undoubtedly such advantages if the litigation were in Hong Kong, but I do not believe "objectively, injustice can be said to have been done" (per Lord Goff, Spilliada Maritime Corp. v Cansulex Ltd [1987] 1 AC 460, at 482G-H) if the plaintiff were obliged to litigate an identical issue in the PRC TM Office, which has a procedure that achieves acceptable standards of justice.

34. In the result, the defendant's application fails and is dismissed.

35. There seems, from what I know, no reason why the plaintiff should not have its costs in any event, with a certificate for two counsel, and I make an order nisi accordingly.

JK FINDLAY
Judge of the High Court