IMPROVER CORPORATION MEPRO CO KIBBUTZ AND ANOTHER v. RAYMOND INDUSTRIAL LTD AND ANOTHER

Headnote

        Alleged infringement of European Patent. Interlocutory injunction - effect of S. 6 of Cap. 42 - Does the European Patent Convention have any application.

Held - The Convention does apply.

1988 No. A5344

IN THE SUPREME COURT OF HONG KONG

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BETWEEN

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JUDGMENT

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1. The Plaintiffs are seeking an interlocutory injunction against the Defendants for the infringement of a European Patent which has been registered in Hong Kong.

2. The lst Plaintiff is the registered proprietor of the Patent and the 2nd Plaintiff is company which has the sole right to manufacture the invention.

3. The invention is described as being an electromechanical depilatory device. Put in simple terms it is a piece of equipment like an electric shaver which instead of shaving unwanted hair plucks the hair from the skin with the intended result that hair will not grow again quickly and the area of skin which has been subjected to the process will not be unsightly.

4. The 2 inventors of the process are Israeli gentlemen who are members of the kibbutz referred to in the title of the proceedings. It is obvious from the documents filed in support of the application that a great deal of time and energy has been expended on refining the device and developing a market for it.

5. I think it would be accurate to state that these efforts have met with phenominal success. 6 million pieces have been sold over a period of about 2 years and sales have been running at the rate of 700,000 per month.

6. The plaintiffs or companies associated with the Kibbutz have been engaged in extensive litigation concerning alleged infringments of their rights.

7. The 2nd Defendant is a subsidiary of the lst Defendant. The 2nd Defendant manufactures a deplilatory device in China. The lst Defendant entered into contractual relations with Remington, an internationally known marketer of equipment of this type. They are particularly well-known for an electric shaver which is marketed in their name.

8. It came to the plaintiffs' knowledge that Remington intended to market a deplilatory device which would compete in the market place with their invention.

9. In the supporting affidavits particulars have been given of the efforts which were made on the plaintiffs behalf to trace where Remington's device was being manufactured. I think that it could be said fairly that Remington did little to assist in these efforts. Indeed there was no reason why they should co-operate in such endeavours. I am however satisfied that Remingtons have not done anything reprehensible on the basis of the material before me.

10. It is evident from the information available to me that they have consistently maintained that their depilatory device in no way infringes the Plaintiffs rights.

11. This contention has been tested on a number of occasions when the Plaintiffs have taken legal action for infringements in different markets around the world.

12. During the course of the hearing my attention was particularly focused upon the litigation which has been conducted in the United Kingdom, Germany, Holland, France and Italy.

13. In England the Plaintiffs took action against Remingtons which was hotly contested. Remingtons took out a counter application for the Plaintiffs Statement of Claim to be struck out on the ground that it disclosed no reasonable cause of action. The applications were heard by Falconer, J. and he acceded to Remington's application and ordered that the Statement of Claim, should be struck out. This order was taken on appeal to the Court of Appeal and they reversed the decision of Falconer, J. and held that the Plaintiffs had demonstrated that there was a triable issue and following the principles laid down in American Cyanamid v. Ethicon, 1975 AC396 ordered that an injuction should be granted.

14. The decision of the Court of Appeal has been of particular interest to me and is helpful in containing an analysis of the respective features of the Plaintiffs device and Remingtons.

15. One of the matters which weighed heavily with Dillon L.J. in the Court of Appeal was the fact that a German Court, having before it an almost identical situation in relation to a European patent had come to the opposite conclusion to Falconer, J.

16. At the commencement of the hearing before me Mr. Young for the Defendants informed me that he would not be pursuing the defendant's application to strike out the Plaintiffs' claim and that he would be confining himself to opposition to the Plaintiffs application for an interloctory injunction.

17. While Mr. Young did not concede the correctness of the Judgment of the Court of Appeal he did kindly indicate that the main line of his opposition would be based upon the inapplicability of the Court of Appeal decision to the facts of the present application and also the different nature of the law in Hong Kong.

18. I consider that the most important matter for determination by me is the latter point made by Mr. Young. Mr. Young referred to Section 6 of the Registration of the Patent Ordinance Cap. 42. This provides :

"Such certificate of registration shall confer on the applicant privileges and rights, subject to all conditions established by the law of Hong Kong, as though the patent had been granted in the United Kingdom with an extension to Hong Kong."

19. He argued that in construing the meaning of this section it was necessary to have regard to the background situation. Most importantly it was necessary to consider whether the European Patent convention had any application to Hong Kong.

20. Clearly Hong Kong was not a signatory to the convention. This was hardly surprising as its purpose was to harmonise the law of members of the European Economic Community.

21. Mr. Young suggested that the correct approach to adopt was the one adopted by the Court of Appeal in Smith Kline and French Laboratory v. Attorney General 1966 HKLR498. Huggins J. as he then was said  at p. 510 :

"What one had to ask is, what privileges and rights would be conferred upon a person to whom were issued in the United Kingdom letters patent with an extension to Hong Kong? It seems to me that counsel for the plaintiffs is right when he submits that basically they are the same privileges and rights as would be conferred on a person to whom were issues in the United Kingdom letters patent without any extension and that the extension affects only the geographical area within which protection is granted. The extension would operate in precisely the same as the assignment in a patent of a place in, or part of, the United Kingdom or Isle of Man under the proviso to s. 21(1): that is to say, the nature of the privileges and rights is not altered but only their territorial extent. The nature of the privileges and rights is only in part defined by the provisions of the Act. Section 21(1) says:"

 

"a patent sealed with the seal of the Patent Office shall have the same effect as if it were sealed with the Great seal of the United Kingdom, and shall have effect throughout the United Kingdom and the Isle of Man".

 

and then at p. 513 :

"We were referred to the interlocutory decision of the High Court of Lagos by Chuba Ikpeazu, J. in Rhone Poulenc S.A. v. Lodeka Pharmacy Ltd. (1965) Suit No. LD/491/64, a case where a similar point fell to be decided. The legislation of the Federation of Nigeria and Lagos includes a provision which is mutatis mutandis identical to s. 6 of our Registration Ordinance. The learned judge said :- "

 

"The Patent Act of 1946 does not in my view apply in its totality or as such to this country and it does not appear to me that I will be influenced by section 46(1) of the Act by the construction placed on it by the Court of Appeal. The effect of section 6 of the Registration of United Kingdom Patents Ordinance is that the registration confers on the person who registered the patent, privileges and rights such as are conferred on the patentee in the United Kingdom. This does not mean that the whole Patent Act applies. What is extended to Nigeria and which ensures in favour of the applicant for registration are the unalloyed privileges and rights of the patentee and nothing more."

 

"Counsel for the Crown objects that the expression "unalloyed privileges and rights of the patentee" is wholly inaccurate and that such privileges and rights do not exist. I would respectfully question whether any advantage is to be gained from using a term which is so readily open to misconstruction but I am satisfied that when properly understood it is not inaccurate and I would agree with the law as stated by the learned judge in this passage of his judgment. What he was, I think, intending to convey was what counsel for the plaintiffs in the present case meant when he said that the Common Law rights of the patentee under the Letters Patent were not altered in any respect except only that of their territorial extent, and that the rights obtained by the patentee by registration in Nigeria were prerogative rights subject only to the law of Nigeria. The learned judge went on to indicate that in Nigeria there was no legislation which specifically conferred on a department of the Federal Government any power which could authorize a third party to do an act which would prima facie be an infringment of a patent. That is precisely the position here."

22. According to Mr. Young it was clear from these passages that section 6 conferred upon the Applicants the common law rights of the Patentee under Letters Patent. This being the case I should disregard entirely the provisions of the European Patent convention and simply adopt the principles laid down by Lord Diplock in Cathnic Components Ltd. v. Hill & Smith Ltd. 1982 RPC 183.

23. If I did this I would find myself in the same position as Falconer, J. when he heard the London proceedings at first instance.

24. I regret that I do not accept the validity of this submission. I agree with Mr. Carr's contention, on behalf of the Plaintiffs, that the essential requirement is for me to have regard to what section 6 actually says.

25. There is nothing in the section to suggest that I should adopt the approach proposed by Mr. Young. It states in clear terms that the rights conferred are the same as those conferred upon the Holder of a U.K. Patent. The definitions contained in section 2 make it clear that a European Patent is also envisaged.

26. Smith Kline & French v. Attorney General was concerned with an entirely different matter and l see no conflict in the approach which was adopted in that case.

27. Even if I am wrong in this I am by no means convinced that my decision would be any different. I think that Mr. Carr is correct in his contention that even if I disregard the European Patent Convention and adhere to the principles laid down in Cathnic components I would end up with the same result. This can be seen from the passage on pp. 842 and 843 of Dillon L.J. 's judgment in the London Proceedings.

"So far as the development of English law is concerned, the latest decision is the decision of the House of Lords in Cathnic Components Ltd. v. Hill & Smith Ltd. (1982) R.P.C. 183. It seems to me, if I may say so with respect, that the well-known speech of Lord Diplock in that case correctly indicates the same approach to construction as is indicated in the protocol. The most important passage in Lord Diplock's speech was cited by Falconer J. at page IQ of his judgment, where Lord Diplock said : "A patent specification should be given a purposive construction rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge. The question in each case is: whether person with practical knowledge and experience of the kind of work in which the invention was intended to be used, would understand that strict compliance with a particular descriptive word or phrase appearing in a claim was intended by the patentee to be an essential requirement of the invention so that any variant would fall outside the monopoly claimed, even though it could have no material effect on the way the invention worked." (Page 243 in the report of Lord Diplock's speech). But it is also important to note that at page 242 he commented that "both parties to this appeal have tended to treat 'textual infringement' and infringement of the 'pith and marrow' of an invention as if they were separate causes of action, the existence of the former to be determined as a matter of construction only and of the latter upon some broader principle of colourable evasion. There is, in my view, no such dichotomy; there is but a single cause of action and to treat it otherwise, particularly in cases like that which is the subject of the instant appeal, is liable to lead to confusion.”

28. The consequence of all of this is to bring me to a conclusion that the plaintiffs have on the material before me established that they have an arguable case, in accordance with the criteria I laid down in American Cynamide that the Defendants have infringed their rights.

29. Before analysing any of the matters required to be considered in American Cynamide I must first consider whose rights and interests come within the ambit of this application. Obviously I must have regard to the interests of the plaintiffs and the Defendants. Am I though to have regard to the interests of Remington?

30. I consider that the answer to this must be in the negative. There are 2 reasons for this.

31. The first is that it is obvious that Remington are well aware of this litigation. They have not sought to make any application under Order 15 to be joined as a party. Had they done so they could have made representation on how any order could impinge on their interests.

32. The second and I think more important reason is the stance they have chosen to adopt in this matter. It is strongly my impression that it is a "hands off" attitude. Although the Defendants have given a lot of evidence concerning the problems they would encounter if an injunction is granted there is virtually no evidence of the contractual relationship which exists between themselves and Remingtons.

33. I do not think in these circumstances that it would be right that I should regard the interests of Remington as being synonymous with the defendants. I consider that the correct approach to adopt is to simply have regard to the interests of the plaintiffs and the interests of the Defendants.

34. The next matter for me to consider is whether damages would be an adequate remedy for the Plaintiffs.

35. I do not think that they would be. I am satisfied on the evidence before me that the Plaintiffs have created the market in devices of this nature. It has proved to be an explosively expanding market. There are so many imponderable factors that it would not be a feasible exercise to attempt to quantify damages which are likely to arise if infringing competitors are allowed to appear on the market.

36. In any event it would be far too simplistic to attempt to relate potential damages to the sales of other devices. There is a conflict of evidence conerning the respective virtues of the two devices and it is quite possible that the market would be disrupted by the existence of other products.

37. There is a much greater degree of certainty when one considers the position of the Defendants. All that they would lose would be the ability to send the devices they make to Hong Kong during the currency of the injunction. In this connection it is worth observing that the Court of Appeal did order that there should a speedy trial. With that in mind it is likely that the duration of the injunction would be something in the order of 3 to 6 months.

38. The devices are being manufactured in China. Obviously there can be no question of any injunction extending to a prohibition against the manufacture of the devices.

39. No convincing evidence is available as to whether the Defendants would be able to continue manufacturing the devices. I think that it would probably be fair to the Defendants to proceed on the assumption that the granting of an injunction would effectively disrupt their manufacturing of the devices.

40. While there is a paucity of evidence concerning the contractual relationship with Remingtons common sense would indicate that they would have some form of redress against them.

41. In my view it would be a lot easier to quantify damages which would arise out of effectively preventing 3 to 6 months manufacturing of the articles than it would be to attempt to work out the consequences of disrupting the market which has been created by the Plaintiffs.

42. There is a further difficulty. I am by no means certain on the evidence before me that the Defendants would necessarily be in a position to meet any award for damages which may he awarded if the Plaintiffs succeed at the trial. The damages would almost certainly be very substantial. While I accept that the 1st defendant is a publicly listed company it seems unlikely that they would be able to generate sufficient profits to meet a likely award from their current operations.

43. I was also not satisfied that the Plaintiffs would be able to implement the terms of the undertaking they were required to give as to damages if  the injunction was granted.

44. During the course of submissions Mr. Carr advised me that his clients had instructed him that they would be prepared to enter into a bond or guarantee to fortify the undertaking in any sum that the Court was likely to order in all the circumstances. As it subsequently transpired when I advised the parties of my decision, I was informed that the Plaintiffs were willing and able to provide security for HK$1M which was the sum I ordered should be secured.

45. This being the case I am satisfied that the Defendants are sufficiently protected from foreseeable damages which may arise as a result of the undertaking having to be implemented.

46. Having come to the conclusion I have it is not necessary for me to go on to weigh the balance of convenience. I would however observe that had it been necessary for me to do so I would have found the balance to strongly tilt in favour of granting the injunction. One of the factors which has to be weighed in any such exercise is what I think can best be described as risk containment. If all the various risks are considered it seems much more likely that irreparable damage would be caused if I declined to grant the injunctions rather than granting it.

47. The only other matter I would refer to is the Defendants complaint that the Plaintiffs have been guilty of delay. I can see no justification for this complaint. All the evidence tends to confirm that the Plaintiffs did everything possible to purse their rights notwithstanding the fact that they received little or no co-operation from the defendants or Remingtons. They could not commence proceedings until there was an infringement in Hong Kong. The first intimation they had of such an infringement was in May 1988. The proceedings were commenced in July 1988. In the context of the worldwide litigation I do not think that this delay was unreasonable or occasioned the Defendants any prejudice.

48. As I have said I have already advised the parties of my decision. These are my reasons for coming to the conclusions I did.