XCHRX CHEERFUL ENTERPRISES CO. LTD. v. NISHA ELECTRONIC INDUSTRIES LTD.

HCA 993/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 993 OF 2001

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J U D G M E N T

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1. This is an Order 14 application for summary judgment.

History

2. The plaintiff is a company incorporated and carrying on business in Hong Kong as a manufacturer and distributor of educational toys. A recent product it has designed, manufactured and marketed is an electronic video game having the appearance of a notebook computer which it calls 'Cyber Computer". A director of the plaintiff called Hau Kwok Hung (Mr Hau) claims to have conceived the idea and, with professional assistance, the product was designed and built complete with packaging and literary material to display and promote it. The plaintiff applied to register the design in the Register of Designs pursuant to the Registered Designs Ordinance Cap. 522 (RDO) in May 2000 and a certificate of registration issued in June 2000. Thereafter Mr Hau for the plaintiff contracted with a manufacturer on the Chinese Mainland to make the product, and it came on the market in July 2000. Since then it has been promoted in Hong Kong and elsewhere. Mr Hau says up to 40,000 units have now been sold.

3. In September 2000 the plaintiff applied for registration of the design in Mainland China. That was granted in March 2001; a certificate to that effect has issued.

4. The defendant is a company incorporated in Hong Kong and carrying on business as a merchant in toys. It hired a booth at the Hong Kong Toys and Games Fair held in January 2001, displaying sample products it was marketing. The plaintiff also had a stall, and Mr Hau attended the fair. On the defendant's stall he spotted an electronic device called Cyber Computer which carried thus the same name as the plaintiff's product. But more particularly it bore a striking resemblance to the plaintiff's registered design. Recognizing the man in charge of the booth as a director of the defendant called Manahor Chugh (Mr Chugh) he told him the product was infringing the plaintiff's exclusive design rights and requested him to withdraw it. Mr Chugh refused to do so without documentary proof of the plaintiff's right. When his request was declined Mr Hau, on legal advice, caused a sample of the defendant's so-called Cyber Computer to be purchased from the defendant by a commercial investigator posing as a customer.

5. On inspection the defendant's version was found to be nearly identical with that of the plaintiff and a copy in all material respects. Furthermore, the packaging and promotional data also was virtually the same. The plaintiff having at no stage authorized any person or entity to make use of its design he caused the plaintiff to issue a writ giving rise to these proceedings.

The Claim

6. The plaintiff seeks an injunction to restrain the defendant from infringing its registered design in Hong Kong and requests delivery to it of all stocks in its possession, together with any drawings, moulds or other equipment it may have used in the manufacturing process, and all packaging and related literature. It also asks for an enquiry into damages or an account of profits and, ultimately, payment of these, interest and costs.

The Defence

7. The defendant, unrepresented in these proceedings, has prepared and filed its own defence, Mr Chugh being the author.

8. In it he denies that the defendant has infringed the plaintiff's registered design. It received one sample only of the product in question, purchased from the representative in Hong Kong of its Mainland supplier. He claims that the product has its own design protection, that having been applied for on the Mainland and granted by certificate in March 2001. He has no direct knowledge of the plaintiff's so-called design registration in Hong Kong not having been shown, on request, documentary evidence of this.

9. He pleads the plaintiff's claim, if any, should be against the Mainland supplier, not the defendant. The defendant being a merchant in Hong Kong having acquired one sample only has no other stock, drawings or moulds or other equipment, no packaging and no literature. And there having been only one sale, profit was minimal.

The Order 14 Summons

10. Following the receipt of the defence the plaintiff applied for summary judgment under Order 14 Rule 1 of the Rules of High Court upon the grounds that the defendant has no defence to its claim.

11. In support Mr Hau has sworn an affidavit setting out the history as I have recounted with exhibits verifying that history, and stating his belief that there is no defence. Two further affidavits have been filed in support; one from his solicitor establishing the design registration in Hong Kong and the other from the commercial investigators engaged to purchase the Cyber Computer from the defendant.

12. Mr Chugh filed an affidavit in opposition denying that the defendant had been in breach and otherwise confirming the content of the defence. He reiterated that the product he was marketing and sold had the protection of design registration in China.

The Issues

13. For the plaintiff to succeed in its Order 14 application it requires a positive answer to the following questions:

(1) Do the affidavits filed by the plaintiff verify the facts upon which its claim is based and state the belief that there is no defence, except as to the question of damages?

(2) If so, has the defendant failed to show cause against the application such that it should not be given leave to defend, either unconditionally or conditionally?

The Law

14. The plaintiff's claim is founded on section 31 RDO the relevant parts of which are as follows:

"31. Rights conferred by registration

(1) subject to this Ordinance, the registration of a design under this Ordinance gives to the registered owner the exclusive right -

(a) to make in Hong Kong or import into Hong Kong -

(i) for sale or hire; or

(ii) for use for the purpose of trade or business; or

(b) to sell, hire, or offer or expose for sale or hire in Hong Kong, any article in respect of which the design is registered and to which that design or a design not substantially different from it has been applied.

(2) The right in registered design is infringed by any person who, without the consent to the registered owner and while the registration is in force -

(a) does anything which by virtue of subsection (1) is the exclusive right of the registered owner; ......."

15. Section 65 RDO deals with evidence, the relevant part of which states:

"65. Register is prima facie evidence

(1) Subject to subsection (4), the Register shall be prima facie evidence of anything required or authorized by this Ordinance or the rules to be registered.

(2) A certificate purporting to be signed by the Registrar and certifying that any entry in the Register which he is authorized by this Ordinance or the rules to make has or has not been made, or that any other thing which he is so authorized to do has or has not been done, shall be prima facie evidence of the matters so certified. ........"

16. Liability for infringement of registered designs does not depend on proof of the defendant's knowledge of the registration. But if the defendant is able to prove that at the date of infringement he was not aware and had no reasonable grounds for believing that the design was registered he will escape liability for damages or having to account for profits; see section 51 RDO the relevant part of which states:

"51. General restriction on recovery of damages or profits

(1) In proceedings for the infringement of a registered design damages shall not be awarded, and no order shall be made for an account of profits, against a defendant who proves that at the date of the infringement he was not aware, and had no reasonable grounds for believing, that the design was registered. ........"

The Hearing

17. At the hearing I was taken through the affidavits and exhibits filed by the parties. I viewed the certificate of registration that issued from the Registrar of Designs in Hong Kong in favour of the plaintiff. I did likewise to those that issued from the equivalent office in China, in favour of the plaintiff from one hand and the defendant's supplier on the other. Coincidentally both came out on the same date in March 2001.

18. I also had the opportunity of inspecting and comparing the plaintiff's product and packaging with that purchased from the defendant. I have to say they are strikingly similar. They have the same dimensions, open and close by the same type of catch, have keyboards that are very nearly the same and, by all accounts, perform the same or similar function. They both are called Cyber Computer which words are emblazoned across the lid in the same stylized writing.

19. Even closer in resemblance is the packaging; it is the same size, carries the same graphics and the same promotional material, which even has the same grammatical errors.

20. Mr Chugh conducting his own defence disputed there was similarity, pointing out at least one functional difference. He also reiterated that the product he was dealing with had its design protection. That its registration was certified in China on the same day that the plaintiff's product was registered was to his mind a clear indication that there are design differences, warranting expert evidence on this issue and arguments on law as well. He submitted that the defendant had done enough to make out an arguable defence and a trial was warranted.

21. Mr Ling representing the plaintiff said it had established its case and there was no defence and sought judgment in terms of a draft order filed.

The Outcome

22. It is quite apparent from an inspection of the two products and packaging that one is a direct copy of the other. How it has come to pass that both were able to achieve design protection from the same office in China on the same day is, to say the least, extraordinary. But that is not a matter for me. I am only concerned with protection in Hong Kong. The plaintiff has proved, by certificate, that it has design protection in Hong Kong to the exclusion of all others including the defendant. The defendant having sold a product "of a design not substantially different" has infringed that right; the plaintiff is entitled to redress.

23. Does that include a claim in damages or an accounting of profits? Can the defendant avoid this under section 51 RDO?

24. I am satisfied Mr Chugh was, at the Toy Fair, forewarned of the plaintiff's design registration. If he had reason to doubt that, it was for him to check the register. The plaintiff had done enough by putting him and thus the defendant on notice. The defendant became liable when it chose to take no steps and to sell the product to a representative of the commercial investigator.

25. The plaintiff succeeds in its application for summary judgment. I am satisfied as to the terms of the draft order submitted and that is now an order of this court, save that the order for costs is nisi at first instance.

26. The terms now follow.

27. IT IS ORDERED that final judgment be entered against the defendant herein in terms hereinafter appearing, namely:

(1) That the defendant whether acting by itself, its directors, officers, servants or agents or any of them or otherwise howsoever be restrained and an injunction is hereby granted permanently restraining it from infringing the Hong Kong Registered Design No. 0010597.7 and from authorising, procuring, causing, enabling or assisting others so to do.

(2) That the defendant do within 7 days of the service of this Order deliver up to the plaintiff's solicitors for disposal by the plaintiff all goods, documents, tools, dies, casts, moulds, plates silkscreens, photographs, negatives, drawings, packaging, boxes, labels and other articles or materials (hereinafter referred to as "the Offending Items") which are in the Defendant's possession, custody, power or control, the continued retention, use of or dealing in or with which by the defendant would offend against the foregoing injunction.

(3) That the defendant do within 7 days of the service of this Order by a director duly authorized make and file an affidavit or affirmation and serve a copy thereof on the plaintiff's solicitors setting forth the names and addresses of all persons, firms or companies:

(a) by whom the defendant has obtained supply of;

(b) from whom the defendant has received orders for;

(c) to whom the defendant has sold, offered to sell or supplied

the Offending Items the subject of restraint of the foregoing injunction together with the date, consideration and quantity of each such sale or supply and exhibiting hereto true copies of all related documents, including but not limited to correspondence, quotations and invoices and setting forth full particulars of the defendant's promotion activities of the Offending Items, if any.

(4) the following enquiries be made, that is to say,

(a) an enquiry as to what damages have been suffered by the plaintiff by reason of the defendant's acts of infringement of the plaintiff's said Registered Design;

(b) an enquiry as to what interest the plaintiff is entitled to on such damages.

(5) The defendant to pay the plaintiff all sums found due upon taking of such enquiry.

(6) The costs of the said enquiry be reserved to the Master hearing the enquiry.

(7) That the defendant do forthwith pay to the plaintiff the costs of and incidental to this action, including the costs of and incidental to this application, such costs to be taxed, if not agreed.