RE PING AN SECURITIES LTD

HCMP 2788/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2788 OF 2004

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J U D G M E N T

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1.  By this proceeding brought by originating motion the applicant seeks a declaration rendering invalid the registration of certain trade marks in Hong Kong in the name of the respondent.  Alternatively, at least as pleaded, it seeks an order revoking those trade marks.

The Applicant

2.  Currently called Ping An Securities Limited, the applicant came into being when it was incorporated in 1993 as Ping On Securities Limited.  But its origins go back to a much earlier time.

3.  In early 1970 a partnership was founded for the purpose of engaging in financial services as a share broker in the fledgling Far East Stock Exchange (FESE), and as such was a founding member of FESE, acquiring and occupying broker seat number 24.  It began conducting business on 29 January 1970.

4.  The business registration certificate of the year reveals it was registered under the name in Chinese characters of 平安股票公司 and in English Ping On & Company.  "Ping On" is the transliteration of the first two characters in the Punti dialect and translates to mean "peace" or "peaceful".  There is evidence not contested that it represents a good omen to the Chinese, with thus beneficial connotations to those dealing in wealth preservation or enhancement.  The next two characters translate to mean "stocks and shares" and the final two "company". 

5.  By 1986 there were four exchanges then separately operating in Hong Kong.  That year they merged to form one exchange called the Stock Exchange of Hong Kong Limited (HKSE).  Ping On & Company continued to function through the transition; in the new exchange it occupied broker seat number 0800. 

6.  Michael Chan (Mr Chan) made an affidavit in support of the application.  He joined the partnership in 1991 and was appointed to be one of its dealers on the HKSE.  He was to become a shareholder and director of the applicant when it was incorporated in March 1993.  Due to the passage of time he was unable to produce records of performance of Ping On & Company in the 1970's and 80's, but financial particulars available for the following years demonstrate that the partnership acquired a substantial reputation and goodwill in Hong Kong in financial services in respect of the marks "平安" and "Ping On", having continuously and since 1970 provided to its clientele those financial services.  These were classified in class 36 to be the following:

"

Class 36 -

investment; securities brokerage, dealing and financing; options and margin trading services; provision of security margin financing facilities; custodian trustee and nominees; financial brokerage; financial advices; financial management and consultancy; corporate financing services."

7.  In March 1993 the applicant was incorporated.  It was then named in Chinese characters 平安股票有限公司.  These as is apparent by comparison are the same as those used to denote Ping On & Company, with the addition of two characters signifying "Limited".  The English name chosen was Ping On Securities Limited, thus signifying the type of business to be undertaken.

8.  In fact the shareholders and directors emerged from the partnership Ping On & Company.  The major shareholders were Kenneth Leung and his wife Winnie Leung.  Upon incorporation the applicant took over the operation of Ping On & Company.  It occupied the same office, employed the same dealers and support staff, used the same bank and took over the affairs of the same clientele.  And, within the HKSE, it was made a Member of the Exchange and occupied the same broker seat, number 0800.

9.  The former clients of Ping On & Company were sent a notice of change of name to the name of the newly incorporated company.

10.  During the course of the next decade the applicant undertook significant business for its clients.  Records reveal that in 1998 it turned over more than $7 billion representing an income of more than $22 million.

11.  In the year 2000 there was a further merger of exchanges when HKSE joined the Hong Kong Future Exchange Limited.  Thereafter the applicant became registered as a Participant of the HKSE.

12.  In April 2003 there was a change of ownership of the controlling interest of the applicant, that is of Mr and Mrs Leung, to the end result that the applicant became part of an established group known as the Baron Group.  It remained as before a distinct and separate entity servicing its existing clientele from its own broker seat.

13.  The new management chose, with the approval of the HKSE and the Securities and Futures Commission (SFC) to change the name as recorded in both English and Chinese.  The characters signifying "stocks and shares" were replaced by two characters meaning "securities".  In English the name became Ping An Securities Limited.  Michael Sze (Mr Sze) who at the changeover became the applicant's managing director, a position he holds to this day, adduced evidence to explain why. The characters translating to mean "securities" described the function of the applicant in a more up to date way than the former "stocks and shares" regarded now to be somewhat old fashioned.  The change of the English version was to bring to the name the transliteration in Putonghua of the Chinese characters by which over the years the applicant and its predecessor have been known, to recognize the change of ownership of the applicant, but also the growing use of Mandarin or Putonghua in place of the Cantonese dialect in Hong Kong, particularly in professional and business circles. 

14.  Otherwise, the applicant continues to operate as it and its predecessor of the Ping On (Ping An) marks did before.  Mr Chan, director and the one responsible for dealing accounts and operations of the applicant, testified that its principal business includes security trading in listed securities, debt securities, the organizing of IPO's, the placing and underwriting of securities, nominee services and transfer of securities for a client list in Hong Kong which exceeds 3,000 names.  In 2003 the turnover was $859 million; by 2004 it was in excess of $2 billion. 

15.  Mr Chan also adduced that according to the 2003-2004 annual report of the SFC with whom the applicant as a securities dealer is licensed and registered, it is the only licensee out of 1298 registered using the marks "平安" and Ping An, providing regulated financial services in Hong Kong.

16.  Both Messrs Chan and Sze attested that the above pocket history of the applicant and its predecessor is a clear and obvious indication that the applicant has acquired and maintains a substantial reputation and goodwill in the marks, achieved over a period spanning 35 years.  This was a view endorsed by one Henry Lee (Mr Lee) who is the CEO of IFN Securities, a CPA and who has 16 years experience in the securities and financial service sector in Hong Kong.  Mr Lee has no connection with the applicant.  He described the applicant as one of the veteran securities companies in Hong Kong, more often than not referred to by brokers and others who trade as "平安", "Ping On" or "Ping An".

The Respondent

17.  The respondent came to be established in Shenzhen, the PRC, in March 1988, originally under the name whose English translation is Shenzhen Ping An Insurance Company.  There have, since, been various changes of name: in November 1992 it became in Chinese characters Ping An Insurance Company of China, in January 1997 "Limited" was added, and in January 2003 it became Ping An Insurance (Group) Company of China Limited, being its present name.  The characters signifying Ping An are the same as those used by the applicant and its predecessor.

18.  The respondent's primary business activity has been in insurance, in a big way.  Its Chief Legal Officer Yao Jun (Mr Yao) of Shenzhen attested that as at 2002 it was the second largest insurance company in the PRC with more than 31 million customers, and numerous branch and sub-branch offices throughout China, operated through subsidiaries.  In 1999 its turnover was more than RMB22 billion; this grew by 2003 to RMB67 billion.

19.  In addition to selling insurance the respondent also operates a trust business through a subsidiary called for short Ping An Trust which it acquired in 1996.  A subsidiary of Ping An Trust called Ping An Securities was founded also in1996.  It undertakes services in stock and bond brokerage, securities underwriting and related activity, and these are promoted in an internet financial portal called "PA-18.com".  The respondent opened this in the year 2000.  PA-18.com is available for viewing worldwide, and displays prominently the marks "Ping An" and "平安".

20.  It is said by Mr Yao that of the customer base of Ping An Securities some 300 are based in Hong Kong.  In order to be an investor in Ping An Securities it is necessary to open a bank account in one of a number of approved banks in the PRC, and trading is undertaken in stocks listed in the stock exchanges of the PRC.

21.  The respondent has, since 1992, been operating in Hong Kong through a subsidiary called China Ping An Insurance (Hong Kong) Company Limited.  As the name suggests, its product is limited to providing insurance of various types to customers, both institutional and individual.

22.  On 24 June 2004 the respondent was listed on the HKSE.  But meanwhile it had taken steps the result of which has given rise to this litigation.

The Trade Marks Registration

23.  On 20 August 2003 the respondent applied to the Registrar of Trade Marks in Hong Kong for registration of the marks "Ping An" and "平安" in inter alia class 36 in respect of "financial affairs, monetary affairs and the real estate affairs".  It is immediately apparent that these are the characters and transliteration used by the applicant in providing similar services.  The Registrar advertised the applications; there was no objection; registration was completed on 30 June 2004.

24.  Mr Yao explained that the listing on the HKSE and application to the Registrar for the marks in question are part of initial moves to become the provider of a range of financial services worldwide.

25.  It is his evidence that via the portal, Ping An Securities already has exposure in Hong Kong and a customer base here.  Registration of the marks is a necessary first step to trade directly here.

26.  The respondent was not aware of the existence of the applicant or what it did prior to July 2004 when it complained of the registration and Mr Yao queried that it has the goodwill and reputation in the field of financial services it claims.

27.  Having achieved registration the respondent has now appropriate approval from the relevant authorities in the PRC to set up an asset management company in Hong Kong.  It has now incorporated another subsidiary in Hong Kong for the purpose, and stands ready to apply for a licence from the SFC to start trading.

28.  It is the applicant's case that the registration as it relates to the provision of financial services and the like is in contravention of its right to the use of the marks in financial services, rendered exclusive by the long history of its use of the same in Hong Kong.

29.  It takes no issue with registration in real estate, insurance or other services the respondent provides or intends to provide.  These are activities which it does not engage in and in which it has no interest presently or for the future.

30.  The applicant did not lodge an objection because it missed the publication of the application.  Had it seen it, it would have done so.

31.  Its first knowledge of the registration as a ‘done deal' was when it made application for registration of precisely the same marks on 9 July 2004.  Of course the Registrar rejected the application because of the prior registration.  And of course such registration not only denies the applicant exclusive use of the marks, it puts its continued use of the marks at risk of infringement, because of the protection afforded the respondent as registered owner; see sections 14 and 18 Trade Marks Ordinance, (TMO).

The Application

32.  In the notice of motion and statement of claim the application was brought under various sections of the TMO. 

33.  But at the hearing Ms Tam SC for the applicant told me that the applicant's case focused on rights available to it under section 12, which is headed: "Relative grounds for refusal of registration"; in particular subsection 5 which reads in part:

"	(5)	… a trade mark shall not be registered if, or to the extent that, its use in Hong Kong is liable to be prevented –
		(a)	by virtue of any rule of law protecting an unregistered trade mark or other sign used in the course of trade or business (in particular, by virtue of the law of passing off); …"

The applicant's claim lies in the doctrine of passing off.

34.  Registration having already taken place, the applicant brought its application under section 53, headed: "Declaration of invalidity of registration"; in particular subsection 5, which reads in part:

"	(5)	… the registration of a trade mark may also be declared invalid on the ground:
		…
		(b)	that there is an earlier trade mark in relation to which the condition set out in section 12 … (5) (relative grounds for refusal of registration) is satisfied."

The declaration sought is restricted to registration in respect of financial affairs and monetary affairs.  Thus subsection (8) also comes into play:

"

(8)

Where the grounds of invalidity exist in respect of only some of the goods or services for which the trade mark is registered, the trade mark shall be declared invalid as regards those goods or services only."

35.  Section 80, under the heading "Registration is prima facie evidence of validity etc." is also pertinent.  It reads:

"In any proceedings relating to a registered trade mark, including proceedings for rectification of the register, the registration of a person as owner of a trade mark shall be prima facie evidence of the validity of the original registration and of any subsequent assignment or other transmission of it."

Thus the burden of proof to establish otherwise lies with the applicant.

36.  The relevant date for determining the parties' rights is the date upon which registration of the marks in question is applied for; in this case that is 20 August 2003.

The Defence

37.  As pleaded, the respondent:

(a)	puts the applicant to strict proof of its longstanding use of the marks "Ping An" and "平安"；
(b)	has been using the mark "Ping An" earlier than has the applicant, whose use of it stems only from 2003 when it changed the English version of its name;
(c)	has already established a goodwill and reputation in Hong Kong; alternatively its reputation acquired in the PRC has "spilled over" into Hong Kong.

Passing off

38.  What amounts to passing off is well settled; see for example Kerley's Law of Trade Marks and Trade Names, 14^th edition, 15-016 and onwards.  Nobody has the right to represent his goods as the goods of somebody else, whereby the prospective customer may be deceived into the belief that he is dealing with that somebody else.

39.  Whether there is misrepresentation and deception depends not on any preconceived formula but whether on the evidence and surrounding circumstances these can be made out in any given case.

40.  The claimant must show that on or by the relevant date the mark or marks had, within its country or region of activity, become by user distinctive to it in the minds of those dealing in the claimant's business.  If such reputation is thus established, the effect is that the claimant acquires a quasi–proprietory right to the exclusive use of the mark in relation to goods or services of that kind.  Thus the use by another of that mark or one deceptively similar becomes an invasion of that right, for it is likely to induce customers to buy from him and divert prospective business from the claimant.

41.  The important test in an action mounted is whether or not the claimant has built up a goodwill to the extent that significant damage will be caused by such misappropriation.

42.  Where there is a competition between users as to whose rights are being misappropriated the senior user prevails over the junior user.  A differential in size or volume of business is not material.  A boutique trader with a small turnover should not have to kowtow to a larger competitor. 

Analysis

43.  The gravamen of the defence pursued, as I understand the submissions of Mr Shipp for the respondent, is that the applicant's claim, which is that it has a long history of using the marks to the exclusion of others and has acquired thus the requisite reputation, is wrongful and misleading.

44.  It came into being as a separate entity only in March 1993.  It had no history prior to that.  That it acquired the existing clientele and trading activity of the partnership Ping On & Company is a bare assertion not backed up.  That it took over the goodwill of the partnership has not been made out.  The burden of proof has not been discharged.  The notice of change of name circulated is incorrect in fact and law.

45.  So, if the applicant had any goodwill, it was only from its date of incorporation; namely, 2 March 1993.  But that was using the name whose transliteration into English was Ping On.  For the next 10 years its business was under that mark.  It was only in May 2003 that Ping An came to be incorporated into its name.

46.  By this time the respondent had developed its business activity to include the provision of financial services; in particular, as from August 2000, by means of its portal PA-18.com, in Hong Kong.  Evidence adduced was that as at the critical date of 20 August 2003 it had already 300 clients in Hong Kong.  That makes it clearly the senior partner by three years in any contest for the use of the marks now registered. 

47.  Dealing with these points: first, I do not accept that the applicant has not made out that it acquired a pre-existing goodwill from Ping On & Company following incorporation.  The evidence that it took over the business of Ping On & Company, and benefited thus from its 20 plus years of brokerage under that name, is at once confirmed by the business proceeding seamlessly on, from the same office, with the same traders and personnel, same clients and same broker's seat.  And I do not find that the notice to the partnership's clientele of change of name assists the respondent.  Of course I accept that it was not correct technically.  It seems to me it was intended to be a simplistic way of assuring its clients that it was business as usual under another, similar name.  There was no deception.  For those concerned, the introduction of limited in the name would have revealed the difference to be incorporation.

48.  I am satisfied that the applicant having acquired the business had the benefit of 23 years of trading utilising "Ping On" and "平安" and that continued for the next decade.

49.  Secondly, I do not accept the proposition that it did not utilize the mark "Ping An" until the name change in May 2003.  I accept the reasons given for the change, to update the transliteration from Punti to Putonghua.  The English transliteration stands as it has since 1970 alongside the characters "平安".  It is not a new expression.  It is an amended transliteration.  Commonsense dictates that no one would assume otherwise.

50.  For that reason, the respondent could not be said to have begun use of the mark Ping An in Hong Kong before the applicant chose to utilize it.

51.  Further, I do not accept that the respondent has begun use of the marks in Hong Kong.  Its history reveals that such trading undertaken by the respondent (and I include in that expression its subsidiaries) has been limited to the PRC.  That its website has enabled enrolment from outside the PRC and that there may be enrolled some Hong Kong residents does not change things.  Clients must open accounts in nominated banks in the PRC, and trading is conducted on exchanges in the PRC, not in Hong Kong at all.

Findings

52.  The applicant has by acquisition and use in its own name had the use of the marks "Ping On" and "平安" in engaging in financial services in Hong Kong.  Its predecessor was a founding member of the FESE.  Continuous trading since then has resulted in a substantial turnover and client base; thus in turn a substantial goodwill.  Independent evidence (including that of Mr Lee) confirms what is self-evident.

53.  The introduction of the mark Ping An for Ping On reflected a cultural and economic shift which does not amount to the use of a new name.  The Chinese version has remained unchanged.

54.  In the use of these marks in Hong Kong in providing financial services, it is not the senior user, it is the only user.  These are its marks.

55.  The respondent has indicated an intent to conduct similar activity in Hong Kong.  If it is permitted to do so using identical marks to the applicant's, this will inevitably amount to a deception and loss to the applicant.  And further, the respondent as registered owner of the marks will be able to stop the applicant from brokering under its own name, as has been carried on by it and its predecessor for more than 30 years.

56.  That cannot be permitted.  The applicant is entitled to the protection it now seeks, which is to enjoy exclusive use of its marks in Hong Kong.

57.  It is entitled to the declaration of invalidity it now seeks, in relation to finance and financial affairs, and I order accordingly.

58.  Costs, nisi, are to the applicant.