CAPCOM CO LTD AND ANOTHER v. 長豐書報 (a firm)

HCA 2488/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2488 OF 2006

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J U D G M E N T

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Introduction

1.  These 13 actions were ordered by the master to be tried together.  Although the master ordered them to be tried in two lots, they were heard effectively together (such being the more efficient mode of trial).

2.  The causes of action pleaded by the plaintiffs were infringement of copyright, infringement of registered trade marks and passing-off.  At the beginning of the trial, however, the plaintiffs sensibly abandoned the causes of action in copyright and trade mark.  Consequently, the only cause of action which falls for consideration is passing-off.

3.  Further, the parties have reached settlement in relation to HCA 2493/2006, 2494/2005, 2501/2006 and 2502/2006 (collectively “the settled actions”).  There is thus no need to consider the settled actions in this judgment.

4.  The 1^st plaintiff (“Capcom”) is a Japanese company which has been carrying on the business of producing and selling video games and publishing and selling game strategy guide books.  Capcom was established for nearly 30 years according to the court testimony of the plaintiffs’ witness (or more than 27 years according to his witness statement) (the version given in the testimony is preferred by the plaintiffs).

5.  The 2^nd plaintiff (“Capcom Asia”) is a Hong Kong company which has been engaged in promoting and selling video games and publishing and selling game strategy guide books in Asia (presumably outside the Japanese market).  Capcom Asia was established for about 10 years according to the court testimony (or more than 12 years according to the witness statement) (the version given in the testimony is preferred by the plaintiffs).  It is also pleaded that Capcom Asia is Capcom’s Hong Kong trading subsidiary.

6.  All 13 defendants are newspaper stall operators/owners.  Except those in HCA2492/2006 and HCA 2502/2006 (“the denial of sale actions”), the defendants admit having sold the game strategy guide books in question but deny being liable for passing-off.

The Subject Video Games and Game Strategy Guide Books

7.  Video games have gained such popularity, especially for the younger generations, that they have given rise to a thriving and sizeable industry.

8.  The video games in question, both produced by Capcom, are called “新鬼武者” and “Monster Hunter 2” (collectively “the subject games”).  They are to be played on a home video game machine known as PlayStation 2.  Judging from para. 4 and 5 above, Capcom Asia must have been the company responsible for promoting the sale of, and selling, the subject games in Hong Kong.  Indeed, that is the stance adopted in the plaintiffs’ final submissions.

9.  From the detailed instructions, tips and tricks given in the related strategy guide books (whether published by the plaintiffs or sold by the defendants), it appears the subject games involve quite complex rules and strategies.  Consequently, their players will benefit from the instructions, tips and tricks when playing the subject games. 

10.  In fact, apart from the subject games, there are other video games of similar complexity (the plaintiffs’ evidence mentioned other stand-alone guide books, as well as guides given in video game magazines).  This has given rise to a market for strategy guide books, such as the ones which are the subject-matter of these actions (collectively “the subject guide books”)

Relevant Legal Principles in Passing-off

11.  Kerly’s Law of Trade Marks and Trade Names (2005) 14^th Ed. identifies two forms of the cause of action: the “classical trinity” and the “extended form”.  In the context of these actions, however, it is unimportant which of the two forms happens to be applicable.  They are summarised below for completeness.

12.  The “classical trinity” form defines passing-off as:-

“First, [the plaintiff] must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying ‘get-up’ (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff’s goods or services.

Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to belief that the goods or services offered by him are the goods or services of the plaintiff.

Thirdly, he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered … ” (emphasis supplied) (para. 15-005 quoting Reckitt & Colman Products Ltd. v. Borden (Jif Lemon) [1990] RPC 341, 406 per Lord Oliver).”

13.  The “extended form” defines passing-off as:-

“It is essential for the plaintiff … to show at least the following facts:
(1)	That his business consists of, or includes, selling … a class of goods to which the particular trade name applies;
(2)	That the class of goods is clearly defined, and that in the minds of the public, or a section of the public, … the trade name distinguishes that class from other similar goods;
(3)	That because of the reputation of the goods, there is goodwill attached to the name;
(4)	That he, the plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill … which is of substantial value;
(5)	That he has suffered or is really likely to suffer, substantial damage to his property in the goodwill by reason of the defendants selling goods which are falsely described by the trade name to which the goodwill is attached” (emphasis supplied) (para. 15-009 quoting Warnink v. Townsend (Advocaat) [1980] RPC 31, 105-6 per Lord Fraser).”

The goodwill must be in the country concerned: Kerly, para. 15-010.

14.  Kerly concluded:-

“The present position may be summarised as follows:-
(1)	for passing off in its classic form, the classical trinity, … should normally be applicable and be applied;
(2)	for passing off in its extended form, one can apply either the classical trinity or the Advocaat tests.  Judicial preference seems to vary. …
(3)	there is nothing inherently wrong in applying the Advocaat’s tests to cases of passing off in its classic form, but doing so might raise the suspicion that the case falls into Lord Diplock’s ‘undistributed middle’.  The modern trend is to use the classical trinity … ” (para. 15-013).

15.   Whether there has been passing-off is a question of fact: Kerly, para. 15-005, n. 7; 15-015 to 15-017.

The Plaintiffs’ Case

(a) Goodwill or Reputation

16.  In a properly pleaded case:-

“… it is first necessary to plead facts leading to the conclusion that the claimant is entitled to, or is entitled to share in, goodwill.  Then the acts of the defendant … leading to the conclusion that he is making a misrepresentation must be pleaded. …

Particulars.  So far as proving the claimant’s goodwill is concerned, it is normal to plead extensive use of the name or badge relied upon together with extensive advertising … Particulars of the use and advertising can often advantageously be pleaded initially and, in any event, will have to be given if the defendant is putting the claimant to proof of his goodwill. … ”  (Bullen & Leake & Jacob’s Precedents of Pleadings (2008) 16^th Ed., Vol. II, para. 70-05 and 70-06).”

17.  What has actually been pleaded in these actions is typically this:-

“[Capcom] is and was … carrying on the business of, inter alia, manufacturing and publishing … video game strategy guide books” (para. 1, statement of claim);

“[Capcom Asia] is and was … carrying on the business of, inter alia, manufacturing and publishing … video game strategy guide books … ” (para. 2, statement of claim);

“The Defendant has, prior to the issue of the Writ herein, … passed off, or attempted to pass off, caused, procured, assisted, instigated or enabled others to pass off goods not of [Capcom’s] manufacture or merchandise by displaying, offering for sale, selling and/or otherwise dealing in … strategy guide books … ” (para. 5, statement of claim).”

18.  The plaintiffs’ witness statement is not a lot more specific either:-

“[Capcom] has a long history of publishing strategy guide books for its own video games both in Japan, Hong Kong and Taiwan.  It has long established the reputation in publishing strategy guide books for its video games” (emphasis supplied) (para. 12 thereof).”

A list was produced showing 17 strategy guide books said to have been published by or for the plaintiffs (9 in the 2003 financial year, 5 in the 2004 financial year and 3 in the 2005 financial year).

19.  The witness statement has not made clear which of the plaintiffs actually published the strategy guide books in Hong Kong, but the following reads:-

“… [Capcom Asia] has been founded in Hong Kong for more than 12 years and has published more than 10 video game strategy guide books” (para. 13 thereof).”

It would appear from the above quotes and the witness’ court testimony the strategy guide books said to have been published by Capcom in Hong Kong were in fact published by Capcom Asia (this is verbally confirmed by plaintiffs’ counsel in his final submissions).

20.  The advertisement aspect has also been set out vaguely in the witness statement:-

“… During the year 2006, more than 100 print advertisements [in] various magazines in Hong Kong and more than 120,000 pieces of video game software were sold in Hong Kong” (para. 13 thereof).”

There is no documentary evidence as regards the advertisements.  Hence, it is unknown if they were about the video games or the strategy guide books (or both).

21.  The distinctive features of the plaintiffs’ strategy guide books have not been expressly identified in the pleading or the witness statement.  It is however asserted in the witness statement:-

“The Plaintiffs have long tradition of publishing strategy guide books for its own video games.  The size of their strategy guide books is exactly the same as that of the said strategy [guide book] displayed and offered for sale by the Defendant.  The Plaintiffs also have the tradition to use pictures from their video games on the cover pages of their strategy guide books.  Hence the display and offering for sale of the said strategy guide book of the same size and also with pictures from the [alleged copyright work] is very likely to cause confusion among potential readers … ” (emphasis supplied) (para. 15).

22.  The court testimony given for the plaintiffs does not add much.  When asked by the court, the plaintiffs’ witness added that on average, about 40 to 50% of the buyers of the plaintiffs’ video games also purchased the related strategy guide books.  However, it is unclear how many of Capcom’s video games have related strategy guide books.  The plaintiffs’ witness statement discloses that Capcom published 88 titles of video games in the 2006 financial year.  According to the list referred to in para. 18 above, no strategy guide book has been published after the 2005 financial year (although according to the testimony, that for “新鬼武者” (exhibit “P1”) was published in 2006).

(b) Misrepresentation

23.  The plaintiffs rely on the following matters in support of this aspect of their case.

24.  As stated in para. 21 above, the plaintiffs’ witness statement seems to rely on the size of the strategy guide books and the use of the drawings which originated from the video games as distinctive features of the plaintiffs’ subject guide books.  It is also alleged that the subject guide books sold by the defendants were similar to the plaintiffs’ in those respects.

25.  In their final submissions, the plaintiffs also rely on the following distinctive features:-

(a)	the distinct style of the Chinese words “新鬼武者” on the front cover;
(b)	the “CAPCOM” logo printed on the front and back covers and the spine;
(c)	the laser label affixed on the back cover as an additional identifying feature (about 10% of the strategy guide books from Taiwan does not have the label);
(d)	the covers and the contents were printed in colour, using quality coated paper;
(e)	the Chinese words “官方” (meaning “official”) were printed on the cover of most of the plaintiffs’ strategy guide books.

It is alleged the defendants’ subject guide books were similar to the feature set out in sub-para. (a) above (but not the other sub-paragraphs).  Reliance is also placed on the name “CAPCOM” appearing in the strategy guide book for “Monster Hunter 2”.

(c) Damages

26.  Damages have not been particularised in the pleadings; nor is there proper evidence to prove them.  The plaintiffs argue that the court is still entitled to infer that damages were likely to have been caused, but indicated during final submissions they do not seek damages from the defendants.

The Defendants’ Case

27.  All the defendants put the plaintiffs to proof of their claim in passing-off.

28.  In the denial of sale actions, the defendants also deny having displayed or offered for sale the allegedly offending goods.

Is There Sufficient Evidence ?

(a) Goodwill or Reputation

29.  In determining this aspect, it must be borne in mind what the plaintiffs need to establish is not their general reputation in the video game trade (although that may be a factor to be considered).

30.  The real issue is whether there is reputation attaching to the subject guide books.  And if so, whether the reputation is that of Capcom or Capcom Asia (or both).

31.  I am not satisfied that the plaintiffs have established either of the matters referred to in para. 30 above.

32.  That there is “a long history” or “a long traditional” on the plaintiffs’ part in publishing strategy guide books cannot advance their case.  Merely because an activity has been undertaken for a long time does not necessarily mean a reputation has been established as a result.

33.  The mere assertion of a reputation having been established is of course insufficient.

34.  The plaintiffs’ list referred to in para. 18 above cannot advance this part of their case either.  The quantity of strategy guide books sold is unknown, nor is more detailed information disclosed (such as the plaintiffs’ market share in strategy guide book sales in Hong Kong).  If any pattern can be discerned from the list, it is that there has been a constant decline in the number of strategy guide books published from 2003 to 2006.

35.  As stated in para. 20 above, it was asserted about 120,000 pieces of video games were sold in the 2006 financial year.  But again it is unknown how many of these have related strategy guide books published and/or sold by the plaintiffs.

36.  Finally, there is no evidence showing that Capcom has a reputation so widely recognised in Hong Kong that any goods bearing its trade name, trade marks or copyright work are attributed by the public as Capcom’s goods.

37.  The discussion in para. 29 to 30 and 32 to 36 above assumes reputation attaching to the publication of strategy guide books rests with Capcom.  This is an approach which should lessen the plaintiffs’ burden of proof because an inference can more readily be drawn that Capcom may have established a reputation in Hong Kong attaching to the publication and sale of its video games (see para. 29 and 36 above).

38.  But when asked during their verbal final submissions, the plaintiffs said that the reputation attaching to the publication of strategy guide books in Hong Kong rests with Capcom Asia.  There is no evidence that Capcom Asia enjoys any independent reputation attaching to the publication and sale of Capcom’s video games.  That being the case, there is all the more reason for concluding the evidence adduced is insufficient.

(b) Misrepresentation

39.  I am not satisfied the plaintiffs have established this aspect of their case either.

40.  The alleged distinctive features of the plaintiffs’ strategy guide books have been set out in para. 21, 24 and 25 above.

41.  Although the plaintiffs have not expressly said so, it can be gathered from the above this aspect of their case is based on:-

(1)	an alleged imitation of Capcom’s trade name comprising Capcom’s trade mark: Kerly, para. 15-150;
(2)	an alleged imitation of Capcom’s get-up (book size, the use of similar word font and of characters/pictures from the video games) Kerly, para. 15-175 to 15-190.

42.  Yet again, besides mere assertions, there is no evidence if the plaintiffs (especially Capcom Asia) enjoy any reputation in Hong Kong in Capcom’s trade name and so on: see para. 36 above.

43.  So far as the size of the plaintiffs’ strategy guide book is concerned, there is no evidence whether the potential customer finds this to be a distinctive feature.  For example, there is no evidence whether such a size is well-known to have been used by the plaintiffs.

44.  It is also unclear how the use of the characters/pictures from the video games can be a distinctive feature.  Such use may connote an association between the strategy guide books and the related video games.  But unless there is evidence (there is none in these actions) that the reputation of the characters/pictures are so widely recognised that any product bearing them would be attributed as the plaintiffs’ product, there is no valid ground for contending the mere use of the characters/pictures already amounts to misrepresentation (see Kerly, para. 15-184).

45.  Further, the plaintiffs’ witness agreed that the market situation in Hong Kong for strategy guide books is similar to that of computer software manuals.  There are many manuals for different computer software for sale in book shops (some of these shops specialize in computer software manuals).  Customers are well aware that these manuals might have been written by authors who are unrelated to the authors of the computer software; in other words, the manuals may well be third-party authored.

46.  In fact, the plaintiffs’ witness testified that customers of strategy guide books (similar to those of computer software manuals) are usually not concerned if they originated from the video game manufacturers.  What they are concerned with is whether the strategy guide books provide the tips and tricks they want.

47.  I pause to note that, if the plaintiffs’ strategy guide book for “新鬼武者” (exhibit “P1”) is placed next to the one sold by the defendants (exhibit “P2”), it can be immediately seen that they are books from different sources.  The cover design (although both use the same font or style for the 4 Chinese words, and both use the characters/pictures from the video game) is totally different.  The contents are different.  The plaintiffs’ strategy guide book was printed in colour whereas that from the defendants was printed in black-and-white.

48.  The plaintiffs decided not to publish any strategy guide book for “Monster Hunter 2”, although they planned to do so at one stage.  Although the “CAPCOM” name appears in the back cover of the strategy guide book for “Monster Hunter 2” sold by the defendants, the front cover also shows the name and logo of its real publisher.

Has There Been Sale ?

49.  It is strictly unnecessary to determine this aspect of the denial of sale actions.  I shall do so for completeness.

50.  HCA 2502/2006 (one of the denial of sale actions) has been settled.  Only the defendant in HCA 2492/2006 testified for the defence.  He denied having sold or displayed the subject guide books.

51.  The plaintiffs called the witness who purchased the alleged offending items.  He testified to the effect that the newspaper stall involved in HCA 2492/2006 was one of the stalls from where he bought a strategy guide book.  Despite cross-examination, I find that his testimony to be truthful and reliable.

52.  I conclude otherwise with regard to the testimony of the defence witness.  He changed what he said from time to time during testimony.  For example, he said at one stage he was only on night shift and therefore left the day-time business to his staff.  Books or magazines would be delivered to his stall for sale by the distributors without his prior knowledge.  On further cross-examination, he then claimed he was sure the subject guide books had never been sold or displayed by his stall without explaining why he could remember this without help from his sales records (most of which are missing).

53.  Defence witness also claimed that the photograph taken by the plaintiffs’ witness does not show his newspaper stall (but some unknown stall).  This claim is different from what defence counsel put to the plaintiff witness; namely, the photograph showing the stall is very blurred and direct view of the stall was blocked by on-lookers.

54.  In view of the above, I am satisfied the plaintiffs have established that the subject guide books have been sold by the defendant in HCA 2492/2006.

Conclusion

55.  The plaintiffs’ claim against all defendants (except those in the settled actions) is dismissed.

Costs Order

56.  The parties (except those in the settled actions) agree the usual rule that costs should follow the event is applicable.  There will accordingly be a costs order that the costs of these actions be paid by the plaintiffs to the respective defendants (except those in the settled action) to be taxed if not agreed.

57.  Despite defence argument to the contrary, I do not find these actions to be frivolous.  The abandonment of the two causes of action does not support this conclusion.  For this reason, costs are to be taxed on party-and-party basis (and not indemnity basis as the defence contends).