XCHRX LA CHEMISE LACOSTE S.A. v. CROCODILE GARMENTS LTD.

HCA 2401/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2401 OF 1995

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J U D G M E N T

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Introduction

1. The Plaintiff brought this action against the Defendant for breach of a Settlement Agreement dated 1 May, 1980 by registering a number of trade marks in mainland China. In a Judgment handed down after trial on 29 December, 1999 ("the 29 December Judgment"), I found in the Plaintiff's favour on liability. A number of matters are now raised by the parties in connection with that finding:-

(a) whether the 29 December Judgment should cover the Defendant's trade mark registration No. 981996;

(b) the exact form of the order to be made herein;

(c) costs of the action;

(d) stay of execution of the Order pending an intended appeal.

These matters will be dealt with below under separate headings.

Trade Mark Application No. 981996

2. At the time of trial, the parties appeared to be in agreement as to what the Defendant's trade mark registered in the mainland should include. At p. 3 of the transcript of the 29 December Judgment, I said:-

"CGL considered it was entitled to and did apply for the registration of its logo in mainland China, that is:-

(a) various applications between June, 1993 and December, 1993;

(b) some 20 applications on 1 March, 1995;

(c) an application on 30 June, 1995.

Further, there were also some 17 other undated applications for registration ... (all the aforesaid are collectively "the Subject Applications"). On the other hand, Lacoste considered the Subject Applications constituted a breach of the Settlement Agreement".

The above reference to "an application on 30 June, 1995" is now known to be a reference to the Defendant's trade mark registration No. 981996 in the mainland. The reason why all the Defendant's trade mark registrations were grouped together and dealt with en bloc was because of an agreement which was apparently reached between the parties at the time of trial. This was referred to in the 29 December Judgment as follows:-

"For the purposes of this action, the parties agree the crocodile device marks used in the Subject Applications were the same as the mark registered by CGL with the Hong Kong Trade Marks Registry as registration No. 19 of 1954 ("CGL's Mark"): see para. 7(b) of the Re-Amended Defence, para. 4 of the Re-Amended Reply and para. 6 of CGL's written closing submissions"(p. 5 of the transcript of the 29 December Judgment).

3. Mr Scott for the Defence fairly and readily accepted at the hearing on 10 March, 2000 that the Defence must have at least partly been responsible for bringing about the appearance of agreement: see para. 7 of his skeleton argument for that hearing. He submitted that since the date of the 29 December Judgment, it had come to the attention of the Defence legal team (it is not clear whether it was previously unknown to the Defendant) that registration No. 981996 in fact bears an entirely different appearance to the Subject Applications. The appearance of the Defendant's logo has been set out in the 29 December Judgment as follows:-

"For the purpose of this action, CGL's logo is in essence a crocodile also in a curled posture but with its head facing left (when one is facing the logo)" (at p. 2 of the transcript)

whereas the Plaintiff's logo was described therein as:-

"Lacoste's logo consists of a crocodile in a curled posture with its head facing right (when one is facing the logo)" (at p. 2 of the transcript).

4. At the hearing on 10 March, 2000, Mr Scott showed me a copy of registration No. 981996 (which was never produced as evidence at trial or included in the trial bundles). The mark shown therein depicted a reptile (which looks (at least arguably) like a crocodile) in what looks like a swamp environment (with vegetation and water surrounding the reptile). The reptile adopts a posture very similar to Lacoste's logo: in a curled posture with its head facing right (when one is facing the mark).

5. Mr Scott submitted that in these circumstances:-

"since this shared assumption is shown to be wrong it is open to the Court to hold that Application No. 981996 of 1995 is, unlike the other Subject Application [sic], not confusingly similar with the Emblem Mark" (at para. 14 of his skeleton argument).

6. On the other hand, Mr Ma for the Plaintiff opposed this part of the Defendant's application for the following reasons:-

(a) registration No. 981996 was expressly identified in the 29 December Judgment;

(b) all the Subject Applications had been admitted by the Defendant to be the same as No. 19/1954;

(c) at no stage during the trial did the Defendant seek to argue that registration No. 981996 should be treated differently.

7. Having considered the matter, I consider that the following principles should be applicable to this part of the application:-

(a) "admissions" can be made by a litigant at any stage of the proceedings and can be made orally: see The Supreme Court Practice 1999, Vol. 1, para. 27/3/4:

" ... "Either by his pleadings or otherwise" ... Such admissions may be made expressly in a defence or ... in a letter before or since action brought ... or even orally if the admissions be proved (Re Beeny [1894] 1 Ch. 499)";

(b) an admission which has been made cannot be resiled from unless it is just to allow the party who made the admission to do so. Regard must be had to the interests of both parties. Thus, in The Supreme Court Practice 1999, Vol. 1, para. 27/3/11:

"Resiling from admissions

Where a defendant admitted liability in a letter to the plaintiff it should not be permitted to resile from that admission unless it was just to allow the defendant to do so having regard to the interests of both sides even if the defence had not been amended so as to plead the admission (Bird v. Birds Eye Walls Ltd (1987) The Times, July 24, CA). In determining whether it is fair to allow a defendant to resile from an admission of liability it is not sufficient for the court to presume prejudice to the plaintiff but it is necessary to balance the prejudice suffered by the defendant if deprived of his right to resile against any prejudice which the plaintiff has specifically established he will suffer if the admission is withdrawn (Gale v. Superdrug Stores [1996] 1 W.L.R. 1089, CA)".

8. I therefore agree with Mr Ma when he submitted that it is inappropriate to deal with this part of the Defendant's application in the manner it was dealt with by the Defence on 10 March, 2000. I consider in the circumstances of this case, it is at least necessary to consider the question (as one of the matters relating to whether it is just or whether prejudice is caused) of whether the Defendant was previously unaware of the difference in appearance and if so since when it became aware of it.

9. For the above reasons, no order is made on this part of the Defendant's "application" without prejudice to the Defendant taking out an application in an appropriate manner.

Form of the Order

10. The relief asked for by the Plaintiff has been summarized in the 29 December Judgment under the heading "Relief and Damages" (at pp. 28 to 30 thereof). The relief can be grouped into 2 types: the mandatory type which requires the Defendant to perform certain acts in relation to trade marks registered in the mainland (see para. (a) to (d) at pp. 28 to 29 of the transcript) and the prohibitive type which enjoins the Defendant from breaching the Settlement Agreement. My provisional view regarding the 2 types of relief was set forth in p. 29 of the transcript of the 29 December Judgment.

11. At the hearing on 10 March, 2000, the Plaintiff handed in a draft Order. The "mandatory" type of the relief is set out in para. 1 to 5 of the draft Order while the "prohibitive" type is set out in para. 6 thereof.

12. In relation to the "mandatory" type of the relief, the Plaintiff was prepared to agree to a "grace period" of 14 days. The Defendant on the other hand asked for 28 days. I consider that 14 days is the appropriate period and therefore will grant an order in terms of para. 1 to 5 of the Plaintiff's draft Order save that the word "forthwith" in para. 4 of the draft should be replaced by "within 14 days of the service upon it of this Order". No issue arose out of para. 7 of the draft Order and an order in terms is granted.

13. Further to the above, the Defendant also objected to the inclusion of the phrase "any mark which is confusingly similar with the Emblem Mark" and asked it to be left out: see para. 4(b) and 6(b) of the draft. The Defendant argued that there was no evidence of any dishonourable conduct on the part of the Defendant and the Court is not dealing with a counterfeiter in this action. In these circumstances, the Defendant submitted that the Court should adopt the approach in Coflexip SA v. Stolt Comex Seaway MS Ltd [1999] F.S.R. 473 and Microsoft Corp v. Plato Technology Ltd [1999] F.S.R. 834.

14. The Court in the Coflexip case granted an injunction order limited to the acts of infringement actually proved in the action, with express liberty to apply. The action involved an infringement of patent and there was no suggestion that the defendant was dishonourable or they had any belief what they had been doing infringed rights held by the plaintiff. The Court opined that the scope of protection, particularly at the edges of a patent claim, could be difficult to determine and could raise fine points of technology which required the assistance of expert evidence. An injunction in general terms may restrain the defendant from doing things he had not threatened or contemplated or not considered by the Court.

15. In the Microsoft case, the defendant submitted to summary judgment that it had infringed the plaintiff's software by selling 5 copies of counterfeit software. The Court granted an injunction restraining the defendant from dealing in software which it knew or ought upon reasonably enquiry to know was counterfeit, drawing a distinction (which the Court considered crucial) between an honest and dishonest trader.

16. Mr Scott contended that there was no evidence the Defendant was a counterfeiter, or there was dishonourable conduct on its part. On the other hand, Mr Ma argued that the general form of order was the usual order made by the Courts in intellectual property cases. Further, and more importantly, the form of the Order sought by the Plaintiff follows the language agreed upon by the parties in the Settlement Agreement: see especially Clause 6(5) thereof.

17. Having considered the matter, I agree with Mr Ma's argument over this issue. The factors I consider to be of particular importance are:-

(a) the language chosen and agreed to by the parties in the Settlement Agreement, especially Clause 6(5) thereof;

(b) the legal principles regarding what is "confusingly similar" as that term is used in Hong Kong trade mark law (and found in the 29 December Judgment to be applicable to the provisions of the Settlement Agreement) are settled and well known to the legal profession;

(c) it is far easier to know whether a device mark is confusingly similar than whether a piece of technical know-how infringes a patent.

18. There will therefore be an order in terms of para. 6 of the Plaintiff's draft Order.

Costs of the Action

19. Mr Scott argued that a great deal of time and expenses had been spent on the plea advanced by the Plaintiff regarding para. 7 of the Re-Amended Reply, that is, the issues of estoppel/variation. There is common ground that the 29 December Judgment made a finding against the Plaintiff over those issues: see the part under the heading "Estoppel/Variation". In view of these matters, Mr Scott asked the costs relating to those issues to be awarded to the Defendant.

20. Mr Ma disputed the validity of that argument, relying on the principles set out in In re Elgindata Ltd (no. 2) [1992] 1 W.L.R. 1207 at 1214 which read:-

"The principles are these. (i) Costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length of costs of the proceedings he may be deprived of the whole or a part of his costs. (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful part's costs. Of these principles the first, second and fourth are expressly recognised or provided for by rules 2(4), 3(3) and 10 respectively. The third depends on well established practice. Moreover, the fourth implies that a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party's costs. ... ".

I consider there is a policy reason behind these principles. If the Courts invariably order costs of the issues to be separately dealt with, much time and expenses will have to be spent in almost every case to determine this aspect. Soon the effort which needs to be spent on it may equal or exceed that spent on the substantive issues.

21. A number of grounds had been put forward by Mr Ma in opposition with which I agree. I find the following matters to be of particular importance:-

(a) the Plaintiff has been the successful party in these proceedings and has to go to trial to achieve this;

(b) the issues of "estoppel/variation" may be independent of and separate from the other issues. However, the evidence related to them was also relevant to other issues, especially the questions of the confusing similarity of the marks and the factual matrix of, and the background to, the Settlement Agreement;

(c) the length of time spent at trial on the evidence relating to "estoppel/variation" was as contended for by the Plaintiff;

In these circumstances, I do not consider there was a significant increase in the length or costs of the proceedings, or that the Plaintiff has raised issues or made allegations improperly or unreasonably.

22. For the above reasons, costs of the action are to be paid by the Defendant to the Plaintiff to be taxed if not agreed.

Stay of Execution

23. Mr Scott informed me that there were definite instructions to appeal against the 29 December Judgment and on that basis asked for a stay of execution to be granted pending the Defendant's appeal. The basis of the application was that the Defendant is at risk of suffering irreparable prejudice if no stay of execution is granted.

24. The Plaintiff's primary position is to oppose the application for stay of execution. In the alternative, the Plaintiff argued that a stay of execution should only be granted upon the conditions set forth in the Plaintiff's written submissions, especially at para. 11 thereof.

25. At the hearing on 10 March, 2000, Mr Scott stated that those conditions were acceptable to the Defendant. The matter was reserved for decision on the understanding that any stay of execution (if granted) will be granted upon those conditions.

26. The Defendant subsequently informed the Court that there was disagreement between the parties as to the meaning of the condition relating to the Defendant's undertaking "not to make use of or otherwise derive any advantage from the Subject Applications". The matter was raised by Mr Scott in a 5-minute hearing on 16 March, 2000. There was insufficient time to dispose of the matter within that time period and the application for stay of execution was further adjourned for the parties to negotiate. The matter will have to be fixed for hearing if no agreement is reached. For this reason, no order is made on this part of the Defendant's application either.

Costs Order Nisi

27. The parties agreed that a costs order nisi can be made herein pursuant to R.H.C. Ord. 42 r. 5B(6). There is no apparent reason why costs should not follow the event. I consider the Plaintiff has at least substantially been success in this application. Costs of the application are to be paid by the Defendant to the Plaintiff to be taxed if not agreed.