XCHRX PFIZER INC. v. ULTRASOUND HOLDINGS LTD.

HCA2712/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2712 OF 1999

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J U D G M E N T

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1. The Plaintiff in this case, Pfizer Inc., is one of the world's foremost pharmaceutical companies and has been selling its products in Hong Kong since 1956. It is also the manufacturer of the now well known drug Viagra which, since its emergence into the world market last year, has been generally hailed as a wonder drug for the cure of erectile dysfunction or impotence of men.

2. The Plaintiff brings this action against the Defendant for passing off and is seeking interlocutory relief to restrain the Defendant using the commonly-known Chinese name for Viagra in relation to a magazine published by the Defendant.

Background

3. Viagra, the proper generic chemical name for which is sildenafil citrate, was approved by the Federal Drugs Administration in the United States of America on 27th March 1998, and is marketed by the name of Viagra. Even before its launch, it has attracted widespread media coverage and is well known world wide by its trade name of Viagra.

4. In Hong Kong, Viagra was not legally available until 5th February 1999 when it was officially sold. Even then it was only sold by prescription. The official Chinese name for Viagra is "Wai Yee Kong" and an application has been made in Hong Kong to register "Wai Yee Kong" as a trade mark.

5. Media coverage in Hong Kong for this drug has been no less extensive than in other parts of the world and the Chinese media has simplified the Chinese name of this drug to "Wai Kor" such that the name "Wai Kor" has achieved the same recognition and distinctiveness in Hong Kong as does the name Viagra in other parts of the world.

The Facts

6. As has already been stated above, Viagra was not officially available in Hong Kong until 5th February 1999.

7. On 21st January 1999 the Defendant put on sale in Hong Kong a magazine with the English name of "Waico Crazy Night". There is no complaint by the Plaintiff in so far as the English name of this magazine is concerned. However the Chinese name of this magazine uses the same Chinese characters "Wai Kor" by which Viagra is known and followed by three other Chinese characters meaning "night life". A second issue of this magazine came out on 28th January 1999 and a third issue on 7th February 1999 indicating that this was a weekly publication.

8. The contents of this magazine, under the guise of an entertainment guide, (amongst other things) encourages and promotes prostitution by identifying brothels and their locations as well as giving ratings for the performances of the prostitutes in those brothels. In brief there can be little doubt that the magazine is pornographic. Indeed it is a fact that each edition of the magazine has been censored by the Obscene Articles Tribunal and classified as a "Class II Article", ie an indecent article, and as such cannot be sold to anyone below 18 years and has to be sealed in transparent plastic bags with prominent warnings when sold in public. When these conditions are complied with, the magazine can be sold legally in Hong Kong.

The Plaintiff's Complaint

9. The Plaintiff bases its case on passing off. Effectively the Plaintiff says that :

(a) the Plaintiff has a reputation and goodwill to protect - in this case the goodwill in the business of selling drugs under the name of Viagra or "Wai Kor" as it is known in Hong Kong;

(b) there has been a misrepresentation made by the Defendant using the name "Wai Kor" for its magazine which is likely to lead to confusion; and

(c) that damage or likelihood of damage will result.

10. On this basis, the Plaintiff says that there is here a serious question to be tried between the parties and the balance of convenience is with the Plaintiff such that an interlocutory injunction should be granted to preserve the status quo as at the time immediately before the first issue of the Defendant's magazine was put on sale on 21st January 1999.

The Defendant's Arguments

11. The Defendant argues firstly that the Plaintiff has not established any goodwill in Hong Kong in relation to the business of selling the drug under the name of Viagra or "Wai Kor" at the time the Defendant started selling the first issue of its magazine on 21st January 1999, since Viagra was not officially sold in Hong Kong until 5th February 1999. Moreover, although there may have been public awareness of the drug Viagra through media coverage in 1998, there is no evidence of the Plaintiff having advertised this drug for sale in Hong Kong.

12. Secondly, the Defendant argues that the Plaintiff has not established that there is here any misrepresentation (and therefore there is no serious question to be tried) because there is no likelihood of confusion since the Plaintiff sells drugs and pharmaceuticals whereas the Defendant's business concerns publication of magazine in relation to entertainment. The very nature of the magazine would cause customers to disassociate it with a "serious" drug like Viagra.

13. Thirdly, the Defendant submits that there can be no damage since no goodwill has been established by the Plaintiff in the business of selling Viagra in Hong Kong. Moreover, even if there is confusion, there is no damage suffered by the Plaintiff as there can be no diversion of business by the Defendant, and that damage to reputation without damage to goodwill is not sufficient to support an action for passing off.

14. Lastly, the Defendant submits that even if there is a serious question to be tried, the balance of convenience is in the Defendant's favour because the material time to consider preservation of the status quo is immediately before the Defendant's first issue was put on sale. At that time, since Viagra had not been officially sold in Hong Kong, but the Defendant had built up a goodwill by advertising and publicising the forthcoming sale of the first issue of its magazine, the damage to this goodwill of the Defendant's magazine, no matter how small that goodwill may be, would be irreparable damage to the Defendant and therefore the balance of convenience is with the Defendant.

Goodwill

15. There are conflicting authorities as to whether a passing off action can be brought in respect of a business which is about to commence trading and for which a demand has been created by advertising. In England it seems that a plaintiff in such circumstances has at least an arguable case which may support an application for an interlocutory injunction. In Australia the law as laid down in Turner v. General Motors (Aust) Pty. Ltd. (1924) 42 C.L.R. 352 is clearly in the plaintiff's favour.

16. In Hong Kong, Sears J. granted an interlocutory injunction in the case of Tan-ichi Company Ltd. v. Jancar Ltd. and others [1990] FLR 151 against the defendant from using the name "Tan-ichi" for their restaurant business, a name which has achieved world renown in respect of the famous chain of restaurants of the plaintiff in Japan, but despite the fact that the plaintiff in that case did not have any restaurant business in Hong Kong at the material time, although there was evidence that the plaintiff wished to open a restaurant in Hong Kong. On the point of goodwill Sears J. said at page 155 :

" The reality of the matter, at this stage of the action, appears to be that the defendants quite deliberately took a commercial risk in using the name of the plaintiffs, as they must have realised that, as the plaintiffs were so well-known and of such high international reputation, copying and therefore exploiting their name would lead to financial benefit.

That in itself, in my judgment, demonstrates the plaintiff did have goodwill here. Further, by virtue of Japanese people being in Hong Kong, either as tourists or residents, they have actual or potential customers. The intention to come to Hong Kong is also important. The plaintiffs are losing the opportunity to control and develop the impact of their reputation here and thus loss potential customers. I am satisfied that there is a serious question to be tried and that the plaintiffs have established a goodwill here."

17. Today the better view seems to be that advertising directed at a specific market in actual preparation for trading does generate sufficient goodwill to support an action for passing-off.

18. In our present case all the evidence points in the direction that with all the publicity and media coverage given to Viagra in 1998, it was only a matter of time when Viagra will become available officially in Hong Kong. This was a fact recognised and acknowledged by the Defendant in its magazine when in the first two issues, readers were urged to cut off the top corner of the front page of this magazine and to mail it back to the Defendant with the promise by the Defendant that the first 500 to do so would each receive a Viagra tablet "when it becomes available in Hong Kong".

19. Moreover, there is evidence before me in the form of newspaper reports and articles that towards the latter half of 1998, there was already a black-market for Viagra in Hong Kong, the black market price being given as $1,180 per Viagra tablet. Despite this evidence of the existence of a black-market for Viagra in Hong Kong, the point was never taken by the Defendant that the existence of such a black-market in Hong Kong for Viagra is not a protectable goodwill where the Plaintiff is concerned.

20. In all the circumstances of this case, I have come to the view that there is here a good arguable case for the Plaintiff that it had a protectable goodwill in Viagra as early as the latter half of 1998 - definitely well before the first issue of the Defendant's magazine was offered for sale.

Misrepresentation

21. The main question that I have to ask here is whether there is any likelihood of confusion in the minds of the public that the magazine published by the Defendant is in some way connected to, associated with or linked to the manufacturers of Viagra, in this case the Plaintiff.

22. The Defendant answers that question by saying "No" because the Plaintiff and the Defendant are engaged in different fields of activity.

23. However, Mr Shipp for the Plaintiff has drawn my attention to the following matters :

(a) The name of the magazine including in it the two Chinese characters "Wai Kor" is prominently displayed on the front cover.

(b) The first two issues of the magazine offer to give away to its readers 500 Viagra tablets when it becomes available in Hong Kong.

(c) The first issue of the magazine contains an article entitled "Take Viagra, Sure Win". This article contains visual images of not only Viagra tablets but also the bottle containing the tablets with the label which includes the Pfizer mark on it. The contents of that article is directed to "solving queries of those who use Viagra". It gives the official Chinese name of the drug and mentions that the tablet is queer in appearance but that every man in the world knows its name. The author then goes on to deal with points of interests arising from the invention of this drug, its side-effect and precautions. He then includes in the article the purported results of tests conducted by him in respect of the use of Viagra.

(d) The article referred to above and another article appearing in the third issue of the magazine laud, encourage and advocate the use of Viagra for recreational purpose. The article in the third issue describes how a female reader seduced a colleague of hers by "spiking" his drink wth a Viagra tablet. In that same article, the editor comments that he has "no problem" with Viagra being used in this way, provided the reader is attractive.

24. Furthermore, Mr Shipp has submitted that although the Plaintiff's business is in pharmaceuticals and the Defendant's is that of a magazine publisher, sex is the common nexus which bridges the gap between the activities of the parties and it provides the common link between the drug Viagra and the magazine published by the Defendant, the subject matter of this action.

25. In all the circumstances of this case, looking at the entire picture as a whole, I have come to the conclusion on the points submitted to me by Mr Shipp that there is here a real likelihood of confusion in the minds of the public (generated by the Defendant in the use of the name "Wai Kor", the contents as well as the publicity stunt of offering 500 tablets of Viagra to its readers when it becomes available in Hong Kong) that this magazine is in some way connected to, associated with or even sponsored by the manufacturers of Viagra. Accordingly there is here a serious question to be tried between the parties in this matter.

Damage

26. Having formed the view that there is protectable goodwill of the Plaintiff in its business of selling Viagra, and also that there is a likelihood of confusion in the minds of the public that the Defendant's magazine may in some ways be linked or associated with the manufacturers of Viagra, I accept that there is a likelihood of damage to the Plaintiff's reputation and goodwill in the sense that the Plaintiff has shown itself, on the evidence before me, to be a responsible manufacturer of pharmaceuticals and Viagra is sold in Hong Kong by the Plaintiff only upon prescription. However, if the public is led into believing or thinking that the Plaintiff, through the Defendant's magazine, is promoting recreational use or even somewhat irresponsible use of this drug, then that can result in serious damage to the Plaintiff's reputation and goodwill.

Balance of Convenience

27. Having found from the foregoing that there is here serious questions to be tried, I now turn to consider the balance of convenience.

28. Should the Plaintiff succeed at trial, then the damage to their reputation and goodwill resulting from their magazine will be difficult to quantify and in that sense damages may not be an adequate remedy.

29. On the other hand, the Defendant would not be stopped from continuing publication and sale of their magazine, provided that the Chinese name "Wai Kor" is not used as the name or part of the name of it. In those circumstances, if the Defendant were to be successful at trial, their damages such as changing the name and/or alteration of their advertisement and even loss of sales if proven, are all quantifiable damages.

30. On this basis, the balance of convenience clearly comes down in favour of granting the interlocutory relief sought by the Plaintiff.

Mandatory Injunction

31. The Plaintiff also seeks in paragraph 2 of its Summons an order that the Defendant does forthwith deliver up to the Plaintiff's solicitors any magazines or other publications in its possession, the distribution of which would be contrary to the injunction sought by it.

32. Effectively, this order seeks a mandatory injunction at the interlocutory stage. It is only in exceptional cases that a mandatory injunction will be ordered at such stage of the proceedings. No good reason has been provided to me as to why this is such an exceptional case and I do not consider this to be an appropriate case to order a mandatory injunction at this stage. The Plaintiff in my view would be adequately protected by an interlocutory injunction as sought by it under paragraph 1 of the Summons.

Conclusion

33. For the reasons indicated above, there will be an order to restrain the Defendant, whether acting by itself, its directors, officers, servants or agents or otherwise howsoever until judgment in this action or until further order from publishing, printing, distributing and/or selling any magazine or other publication which contains the "Wai Kor" (偉哥) mark in its name or title.

34. Needless to say this order is granted upon the usual undertakings given by the Plaintiff as to damages.

Costs

35. There will be a costs order nisi that the costs of and occasioned by this application be the Plaintiff's costs in the cause.