WONG TO YICK WOOD LOCK OINTMENT LTD v. SINGAPORE MEDICINE CO. (a firm) AND OTHERS

HCIP 72/2023

[2025] HKCFI 1208

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 72 OF 2023

(TRANSFERRED FROM HCA 595/2014 & HCA 600/2014

(CONSOLIDATED) PURSUANT TO THE ORDER OF THE

HONOURABLE MR JUSTICE LOK DATED 25 SEPTEMBER 2023)

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BETWEEN

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DECISION AND DECISION ON COSTS

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1.  In the PTR hearing on 4 November 2024, the Defendants informed this court that they would withdraw their Defence to the Plaintiff’s claim. Consequentially, this court vacated the trial dates in January 2025 and directed the parties to lodge paper submissions on the terms of the Judgment including costs. This is my decision on these matters.

2.  The original trial of this case (“the Original Trial”) took place in 2021.[1] The Defendants have lodged a successful appeal against the decision made in the Original Trial and the Court of Appeal made an order for the retrial of this case.[2]

3.  The retrial was scheduled to commence on 24 January 2025. According to Mr Clark, Solicitor Advocate for the Defendants, the Defendants had no more financial resources to defend their case in the retrial and so they decided to withdraw their Defence.

4.  The Plaintiff asks for judgment to be entered in substantially the same terms as those in the judgment granted after the Original Trial (“the Original Trial Judgment”) save for some minor amendments. The Plaintiff also requests the court to make costs order in the following terms:

(i) costs of this Action up to the date of this Judgment (including all costs reserved) be paid by the Defendants to the Plaintiff forthwith on an indemnity basis, with certificate for two counsel, to be taxed forthwith if not agreed;

(ii) costs of and incidental to the Plaintiff’s summons dated 28 October 2024 (“the Plaintiff’s Summons”) be paid by the Defendants to the Plaintiff forthwith, to be taxed forthwith if not agreed; and

(iii) costs of the PTR on 4 November 2024 be paid by the Defendants to the Plaintiff forthwith, to be taxed forthwith if not agreed.

Terms of the Judgment

5.  I first deal with the disputes relating to the terms of the Judgment.

6.  The first dispute relates to the terms in §2 of the draft Judgment. In substance, the Plaintiff says that the injunction for passing off should cover all products of the Defendants whilst the Defendants contend that the injunction should limit to “oils, medicated oils, balms and medicated balms”.

7.  According to Mr Clark, the existing terms are too wide and they may cover other unrelated products such as watches and software. On the other hand, Ms Tam, SC, counsel for the Plaintiff, submits that the circumstances of this case show a high propensity on the part of the Defendants to populate the market with multiple variations of packaging designs with names and get-ups deceptively similar to the Plaintiff’s product name and get-up. The likelihood of the Defendants repeating the same wrong is obvious, as is their intention to come up with new ways to do so. The terms of the injunction should therefore be inclined towards stronger protection rather than weaker.

8.  However, even if there is likelihood of the Defendants repeating the same wrong, there is no basis to suggest that the Defendants will likely to use name or get-up similar to those of the Plaintiff’s products for products other than “oils, medicated oils, balms and medicated balms”. Furthermore, whether the use of similar names on other products amount to passing-off is a matter for debate, and so I would restrict the scope of the injunction to the products as suggested by the Defendants.

9.  The second issue is whether the proposed §2 in the draft Judgment should include the terms “associated in the course of trade with”. The parties dispute as to whether such terms are too vague, unclear, imprecise or subjective.

10.  I agree with Ms Tam that the terms are not too vague. It is trite that the form of misrepresentation protected under the law of passing-off is the use of a mark with which the goods of another are associated in the minds of the public. It is not confined to “switch-selling” or goods “licensed by the Plaintiff”. This is what the law protects and also why the terms of the injunction should be wide enough to cover such protection. There is nothing unclear, imprecise or subjective in the word “associated”. It is a well-established concept in law, and is to be assessed objectively from the perspective of the relevant public and not subjectively.

11.  Further, given the injunction only covers the products as suggested by the Defendants, such proposed terms should not cause undue hardship on the Defendants. I therefore allow such proposed terms as put forward by the Plaintiff.

12.  The third issue is whether the injunction should cover the use of the words “正宗老人” or “老人” simpliciter.

13.  On such issue, I agree with Mr Clark that the injunction should not cover the use of such words per se. In the Consolidated Statement of Claim[3], the Plaintiff specifically pleaded the infringing word marks were “黃道人” and/or “黃道人活絡油” and/or “黃道老人” and/or “黃道老人活絡油”. No case was pleaded or advanced in relation to “正宗老人” or “老人” as an infringing word mark per se. Indeed, it is a matter for debate as to whether the use of such words per se amounts to passing-off. Hence, the proposed terms should be revised such that the injunction would not cover the use of these words per se.

14.  The other major disputes relate to the disclosure obligations in §§4 and 5 of the draft Judgment.

15.  First, Mr Clark argues that there should be a time limit to the disclosure obligation. The Plaintiff commenced proceedings in 2014, and so the Defendants’ disclosure should be from 6 years before that under the Limitation Ordinance (Cap 347). Further, he argues that the terms “by reference to each of the Offending Articles” are unnecessary and too oppressive. Finally, he contends that the disclosure of “all relevant documents” is also unnecessary and oppressive. The Plaintiff does not need all the documents to make the election between assessment of damages and account of profit, and so he counter-proposes the disclosure of “documents evidencing such transactions”.

16.  I agree with Ms Tam that the proposed terms in §§4 and 5 of the Plaintiff’s draft Judgment are quite usual terms as sought in other similar cases. It is indeed unusual to put a time limit relating to the disclosure obligation unless the Defendants can put forward some evidence as to why compliance with such obligation is oppressive. In particular, the purpose of the disclosure obligation under §4 is to enable the Plaintiff to pursue possible claims against other infringers. This has nothing to do with the limitation period, and in any event it is not for the Defendants to be concerned with whether the Plaintiff’s claim against other parties may span a period outside the statutory limitation. I therefore refuse to put a time limit to the disclosure obligations under §§4 and 5.

17.  I also agree to include the terms “by reference to each of the Offending Articles” and “all relevant documents” in §4. Unlike the disclosure obligation under §5 which relates to the Plaintiff’s election to pursue assessment of damages or account of profit, the purpose of the disclosure under §4 is to enable the Plaintiff to trace the source and destination of each of the infringing products, as opposed to disclosure of information as an aggregate for a group of products, without knowing which trader relates to which product. Hence, there is nothing oppressive by including these provisions in §4 of the draft Judgment.

18.  The Plaintiff also requests for “all relevant documents” to be disclosed under §5. I do not think that there is too much hardship in complying with the disclosure of all the documents under sub-paragraphs (a), (b), (c) and (d). That relates to products manufactured, distributed or sold by the Defendants and products in possession of the Defendants. It should not be too difficult for the Defendants to produce these documents so that the Plaintiff can calculate and verify the quantum of the claim against the Defendants.

19.  On the other hand, the documents requested to be disclosed under sub-heading (e) may be voluminous. There may be a lot of tedious documents which may be relevant in assessing the costs incurred by the Defendants in the manufacture of the infringing products, and it may be pre-mature to require the Defendants to disclose all the relevant documents at this stage. In my judgment, in case that any of the Defendants have manufactured or caused to be manufactured the infringing products, they should set out how they assess the costs in the affirmation. Depending on the information provided, the court can then decide at a later stage as to what further documents need to be disclosed.

20.  For these reasons, I do not require full disclosure of “all the relevant documents” under sub-paragraph (e) at this stage. The draft Judgment has to be revised accordingly. I also keep §6 in the Plaintiff’s draft judgment to provide for liberty to apply for further discovery.

Costs

21.  There is no dispute that the Plaintiff should get the costs of the action and the issue is whether such costs should be paid on an indemnity basis.

22.  The legal principles governing the award of costs on indemnity basis have been set out in Town Planning Board v Society for Protection of the Harbour (No 2)[4] and New Century Credit Services Co Ltd v Yeung Hung[5], and I do not want to repeat the same here.

23.  The judge in the Original Trial declined to award costs to the Plaintiff on an indemnity basis.[6] However, the previous costs order is not binding on this court and I have to exercise the discretion afresh.

24.  Ms Tam submits that the Defendant’s conduct in this case took the case “out of the norm”. The conduct and timing of steps taken by the Defendants show that they have engaged in unscrupulous tactics of ambush and delay, depriving the Plaintiff of access to and preservation of evidence that should have revealed the true extent of the Defendants’ infringing activities over a substantial period. The Defendants had raised a number of belated procedural applications during the trial all of which were unsuccessful and not eventually pursued. Further, the move to withdraw the Defence 2 days before the PTR hearing strongly suggests that the only true purpose of the appeal was to gain a bargaining chip with which to conduct negotiation on the disposal of the action and tactical advantage of delaying the proceedings with a view to wear the Plaintiff out of its will to pursue the claim.

25.  Despite the able submissions of Ms Tam, I do not find that the conduct of the defence is unreasonable, scandalous or oppressive so as to warrant an award of costs higher than the normal party-to-party basis. Having reviewed the progress of the case, I do not find that the Defendants had deliberately tried to delay the proceedings. Though the Defendants eventually decided to drop their Defence, the steps that they had taken previously were no more than actions that normal defendants would have taken to defend a claim which they believe to be meritorious. To me, this is just an ordinary hostile litigation with no special or unusual feature which warrants an award of costs on a higher basis. After all, the Defendants had also incurred substantial costs to defend the claim in the Original Trial.

26.  Although the costs order made by the judge in the Original Trial is not binding on this court, the judge had sat through the trial and yet did not find that there was anything unusual or special in the trial which justified a higher award of costs. This court is entitled to take that into account in considering the basis for taxation of the costs of the Original Trial.

27.  I also do not find that there was anything wrong for the Defendants to pursue the appeal. Though the Court of Appeal had allowed the appeal on the ground of judicial copying, the Defendants cannot be said to be unreasonable or oppressive in pursuing the appeal on such ground. Furthermore, the possible result of a successful appeal would be a retrial, and yet the Defendants were prepared to incur substantial costs themselves in the pursuit of the appeal. Such conduct cannot be regarded as unreasonable or oppressive.

28.  The second issue is whether the court should award certificate for two counsel. Both the judge in the Original Trial and the Court of Appeal granted such certificate. Though I have to exercise the discretion afresh, this court is entitled to take into account the views of the previous courts on the question as to whether it was necessary to have two counsel for the conduct of the proceedings before them.

29.  In any event, I agree with Ms Tam that this is a complex case involving voluminous evidence. The Original Trial took 11 days and the written opening and closing submissions filed were extensive. Indeed, the defence case at the trial was conducted by two legal representatives including one solicitor advocate and one counsel. Under such circumstances, there is no reason why the Plaintiff should not obtain certificate for two counsel for the conduct of its claim. I therefore grant such certificate.

30.  There is also an issue as to whether the Plaintiff should have its costs be taxed forthwith or wait for the conclusion of the whole proceedings including the assessment of damages or account of profit proceedings. In my judgment, there is no reason why the Plaintiff should not be entitled to have its costs taxed and paid forthwith. In intellectual property proceedings, it is normal to have split trial on liability and quantum. For one reason or another (such as the plaintiffs’ own financial considerations or the financial ability of the defendants to satisfy any monetary judgements), the plaintiffs may decide not to pursue the claim for assessment of damages or account of profit after they obtain the judgment on liability. Instead of waiting for the conclusion of the whole proceedings, the Plaintiff should be allowed to obtain the fruit of the judgment including the payment of its costs at this stage. As the whole proceedings have yet completed, the court has to make a specific order to enable the Plaintiff to have its costs taxed and paid forthwith. For the reasons given, I make such specific order.

31.  Another issue relates to the costs of the Plaintiff’s Summons for the filing of the supplemental witness statement and the 8^th List of Documents. I agree with Mr Clark that the Defendants should get the costs of the Plaintiff’s Summons.

32.  First, it was the Plaintiff’s very late application to adduce supplemental witness statement and additional documents. There is no reason why these statement and additional documents could not have been filed or disclosed earlier. If the Plaintiff was seeking for the indulgence of the court to file these documents at such a late stage, there is no reason why the Plaintiff should not be asked to pay for the related costs. In fact, the Plaintiff’s Summons expressly provided for the costs of the summons be to the Defendant in any event.

33.  The Plaintiff alleges that the reason for taking out the Plaintiff’s Summons was that it need the additional witness statement and disclosed documents to deal with certain unpleaded defence. Even if the Defendants were to advance such “unpleaded defence”, the Plaintiff could have objected to the case being made at trial. Hence, I see no reason to depart from the general rule that party seeking the court’s indulgence to adduce additional witness statement and documents shortly before the trial in the PTR should pay for the costs of such application.

34.  It is common ground that the Plaintiff should get the costs of the PTR.

35.  Hence I make the following costs order: save that the costs of the Plaintiff’s Summons be to the Defendants which shall be taxed and paid forthwith, the costs of this Action up to the date of this Judgment (including all costs reserved and the costs of the PTR on 4 November 2024) be paid by the Defendants to the Plaintiff forthwith on party-to-party basis, with certificate for two counsel, to be taxed if not agreed.

36.  I also make a costs order nisi that there be no order as to costs of this paper application which shall be made absolute 14 days after the date of the handing down of this Decision and Decision on Costs.