KABUSHIKI KAISHA YAKULT HONSHA AND OTHERS v. YAKUDO GROUP HOLDINGS LTD AND ANOTHER

HCA 2409/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2409 OF 2002

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J U D G M E N T

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1. Hong Kong is a centre for international trade and prides herself as a regional hub for international travelers. The development of its common law has therefore been marked by recognition by the court of the need of the international traders with appropriate responses to new and technological changes in international communications. In the field of passing off, Leonard J held in Wienerwald Holding AG v Kwan Wong Tan & Fong [1979] FSR 381 that the idea that goodwill must be acquired by user or trading within the jurisdiction was outdated and was not the appropriate rule for Hong Kong in 1979. This was followed by Hunter J in Hong Kong Caterers Ltd v Maxim's Ltd [1983] HKLR 287 and Sears J in Tan-ichi Co. Ltd v Jancar Ltd [1990] FSR 151. There has been much debate in this trial as to whether Hong Kong court should adopt the soft line approach (exemplified by these cases and other Commonwealth authorities including ConAgra Inc v Mc Cain Foods (1992) 23 IPR 193, C & A Modes v C & A (Waterford) [1978] FSR 126, Orkin Exterminating Co. Inc v Pestco of Canada (1985) 19 DLR 90 and Dominion Rent a Car v Budget Rent a Car [1978] 2 NZLR 395) or the hard line approach in the English cases like Alain Bernardin et Compagnie v Pavillion Properties [1967] RPC 581 (the Crazy Horse case) and Anheuser-Busch Inc v Budejovicky Budvar [1984] FSR 413 (the Budweiser Case).

2. However, the present case does not concern a trader without any business in Hong Kong. I have set out the background to this case in Paragraphs 1 to 7 in my Reasons for Ruling of 6 September 2002 which is reported at [2002] 3 HKLRD 595. As I said on that occasion, Yakult had been here since late 1960's and from the evidence as to its sales and advertising figures, it has been very successful in Hong Kong. Having heard all the evidence and submissions from counsel, I am of the view that what I said in those paragraphs in my said Ruling could still be adopted as a summary of the background to this case.

3. It has been agreed between the parties although the activities of the Defendants took place in different places, this court should focus on matters occurred within this jurisdiction and the goodwill the Plaintiffs in Hong Kong (see Paragraphs 8, 15 and 18 of the said Ruling and Paragraph 9 of my Ruling on 12 June 2003). Hence, it has not been argued before me that the Plaintiffs could sue the Defendants in this action in respect of tortious acts committed outside the jurisdiction pursuant to the rule of Boys v Chaplin [1971] AC 356. I therefore need not be concerned with the applicability of that rule to intellectual property rights as to which there seems to be conflicting decisions in England: see Tyburn Production v Conan Doyle [1991] Ch 75 and Pearce v Ove Arup Partnership Ltd [1999] 1 All ER 769. There are in fact legal proceedings in mainland China in respect of the activities of the Defendants in the mainland.

4. There is not much dispute as to the primary facts of this case. Agreed facts between the parties are set out in Paragraphs 33 to 56 of the Amended Agreed List of Issues dated 8 August 2003. In addition, at a hearing on 15 May 2003, Mr Ho, counsel for the Defendants, admitted on behalf of the Defendants that the 1st Defendant intended to use a bottle of the same shape and size of the Yakult bottle in mainland China. The witnesses called by the Plaintiffs were not subject to much cross-examination by Mr Ho. In his closing submissions, Mr Ho focused on arguing the insufficiency of evidence to demonstrate a reputation of the Plaintiffs in Hong Kong in the name "養樂多" and to demonstrate confusion in the market occasioned by the Defendants' activities here. Mr Ho also urged this court to distinguish between the goodwill attached to the business of the 2nd Plaintiff from that attached to the business of the 1st and 3rd Plaintiffs. The findings below, unless otherwise stated, are based on the evidence from the Plaintiffs' witnesses which I accept to be true.

The Plaintiffs and their goodwill

5. I need not repeat what I said previously in Paragraph 1 in my Reasons for Ruling of 6 September 2002 in respect of the Plaintiffs and their relationships. Since one of the issues is whether there is an international reputation enjoyed by all members within the Yakult group of companies, I will discuss more about the image of the Plaintiffs as a multi-national group and what measures are in place to ensure the uniformity of standard and quality within the group.

6. The 1st Plaintiff is now holding 15% of the shareholding in the 2nd Plaintiff. The largest shareholder of the 2nd Plaintiff, Matsusho Kabushiki Kaisha transferred 15% out of its 49% shareholding in the 2nd Plaintiff to the 1st Plaintiff in July 2003. 5 out of 10 of the directors of the 2nd Plaintiff are representatives of Matsusho Kabushiki Kaisha. Matsusho Kabushiki Kaisha is also the largest shareholder of the 1st Plaintiff. The evidence of Mr Matsuzono, the current Vice General Manager of the 2nd Plaintiff, established that management staff and technicians were transferred from the 1st Plaintiff to the 2nd Plaintiff. The 1st Plaintiff therefore exercised significant influence over the business operation of the 2nd Plaintiff. It also exercised quality control in respect of the products of the 2nd Plaintiff. Raw material, strains of bacteria and technology are supplied by the 1st Plaintiff. Flavourings for the 2nd Plaintiff's products are provided by a subsidiary of the 1st Plaintiff. There are Technical Collaboration Agreements and Trade Mark Agreements made between the 1st and 2nd Plaintiffs. Those agreements contained provisions governing the licence granted by the 1st Plaintiff to the 2nd Plaintiff as to the use of know-how and trade mark owned by the 1st Plaintiff, including the mark "養樂多".

7. The brochure and promotional material of the 1st and 2nd Plaintiffs produced before this court showed that the 2nd Plaintiff identified itself as part of the worldwide Yakult Group.

8. As for the 3rd Plaintiff, the 1st Plaintiff holds 80% of its shareholding. Mr Eizawa was the President and Managing Director of the 3rd Plaintiff from 1986 to September 2002. He is now an Advisor to the 3rd Plaintiff. He first joined the Yakult Group in 1966 when he worked for the 1st Plaintiff in Japan. He gave evidence that the 1st Plaintiff exercised control over the operation of the 3rd Plaintiff by similar means as those in respect of the 2nd Plaintiff. There were also Agreements made between the 1st and 3rd Plaintiffs concerning the transfer of know-how and technical assistance and the use of trade marks and design rights owned by the 1st Plaintiff.

9. In the promotional material and newspaper advertisements of the 3rd Plaintiff, it highlighted the fact that it was a member of the worldwide Yakult Group and people consumed Yakult products all over the world (e.g. see Bundle E6 p. 2095, 2110, 2127, 2128, 2141, 2152, 2164).

10. The Plaintiffs are very concerned about the standard of hygiene at their manufacturing facilities. Due to the nature of the products, they had to be produced at local plants. The 1st Plaintiff adopted measures to ensure that all production plants within the Yakult Group including overseas ones are of the same standard and detailed internal guidelines were issued by the 1st Plaintiff. It has obtained ISO 14001 certification in respect of quality control and assurance for the Yakult plants. A hygiene control system called Hazard Analysis Critical Control Point was developed by the 1st Plaintiff and adopted by the Yakult production plants. That system facilitates the implementation of total hygiene control through the analysis of potential contamination by harmful microorganism or foreign matter in respect of each and every stage of production.

11. The confidence of the Plaintiffs in their production facilities is demonstrated by their policy of welcoming members of public to visit their factories. In Hong Kong, the 3rd Plaintiff adopted this policy as early as 1982 (see Bundle E6 p. 2159). Press tours to its factory in Taipo were organized in 1998 and the high standard of hygiene was reported in some newspapers (see Bundle E6 p. 2083-4). Similar policies are adopted by other members of the group, e.g. in Europe, see Bundle E7, p. 2246; in Australia, see Bundle E7 p. 2288; in Guangzhou, see Bundle E7 p. 2226.

12. Supporting research and scientific development for the whole Yakult group is carried out by the Yakult Central Institute for Microbiological Research in Japan. It developed a range of healthy food and drinks, cosmetics and pharmaceuticals over the years for sales by companies within the group. Samples of lactic acid bacteria were supplied by the 1st Plaintiff on a regular basis to overseas plants. In respect of the production in Hong Kong, the bacteria used by the 3rd Plaintiff for production are cultured from those supplied by the 1st Plaintiff.

13. As mentioned, the Plaintiffs have been promoting an image that all the Yakult companies over the world are members of one big family. Apart from advertisements and statements in company profiles to such effect, the whole group holds a worldwide conference every two years for management staff of all the Yakult companies to get together to foster the bond within the group. I was shown a tape of the meeting held on 4 November 2001.

14. In view of the aforesaid, Mr Liao submitted that the whole Yakult Group has an international reputation and for passing off purposes, as far as the present case is concerned, all three plaintiffs have a legitimate claim against the Defendants. This is the fundamental difference between counsel. Mr Ho contended on the other hand that the 2nd Plaintiff should be regarded as a completely separate entity for the purpose of passing off and it was the only entity that have made use of the name "養樂多" until the recent use of this name by Guangzhou Yakult Co. Ltd., a subsidiary of the 1st Plaintiff, for its products in Shanghai.

15. It cannot be disputed that the 3rd Plaintiff has substantial business reputation in Hong Kong and Yakult can be described as a household brand here. It has been selling its products in Hong Kong since the late 1960's. Throughout the years, it has been very successful. The 2002 sales figures in Hong Kong were 399,000 bottles per day representing a turnover of US$24,873,000.00. The advertising expenses incurred by the 3rd Plaintiff in Hong Kong for promotion of Yakult in 2002 was US$1,410,000.00.

16. In the circumstances, the goodwill of the 1st and 3rd Plaintiffs in Hong Kong and that of the 2nd Plaintiff in Taiwan cannot be disputed.

The claims of the Plaintiffs

17. Three distinct causes of action were pleaded by the Plaintiff in the Re-re-re-Amended Statement of Claim: passing off, infringement of registered trade marks, contravention of Section 63 of the Trade Marks Ordinance. In respect of passing off, the complaints of the Plaintiffs against the Defendants are pleaded in Paragraphs 14 to 17 of the Re-re-re-Amended Statement of Claim. The major issue is whether the Defendant misappropriated such goodwill (or more accurately, caused confusion in the market) and caused damage to the Plaintiffs by using the names "養樂多" and "Yakudo". The two names have to be considered separately.

18. "養樂多" is the trademark of the 2nd Plaintiff who only has business operation in Taiwan. The owner of the trademark is the 1st Plaintiff and according to the agreement between the 1st and 2nd Plaintiffs, the 2nd Plaintiff cannot extend its business outside Taiwan. However, the "養樂多" mark was also registered by the 1st Plaintiff in Hong Kong, China, Japan, Korea, Malaysia, Singapore, Thailand, United States, Philippines and Brunei. Some of these had been expired whilst some were pending. The Hong Kong registration (No. 14130 of 2002) was certified by the Registrar of Trade Marks on 1 November 2002 and the registration took effect from 1 November 2001. There is no doubt that "養樂多" enjoys a substantial goodwill in Taiwan. This was accepted by the 2nd Defendant in his evidence. The sales quantities in Taiwan between 1994 and 2002 ranged from 1,336,000 to 1,849,000 bottles per day. The sales figures ranged from US$47 million odd to US$64 million odd per year and the advertising expenses ranged from US$665,644.00 to US$227,837.00 per year.

19. The Plaintiffs' case can be summarized as follows: due to the image of all Yakult companies as being part of a large international group and the popularity of "養樂多" in Taiwan, with the large volume of travelers between Hong Kong and Taiwan and the availability of Taiwanese advertisement in Hong Kong through magazines and internet, the association of "養樂多" with Yakult is well-known to a sufficient portion of members of the public in Hong Kong to create confusion in Hong Kong if the Defendants were allowed to use this name. The evidence shows that the numbers of Taiwanese visiting Hong Kong and vice versa are substantial. Between 1997 and 2002, according to information provided by Kwang Hwa Information and Culture Centre, the figures are as follows,

Year	HK to Taiwan	Taiwan to HK
2002	340,310	2,278,873
2001	322,451	2,134,317
2000	263,943	1,859,747
1999	226,450	1,824,423
1998	194,116	1,738,319
1997	177,923	1,896,866

20. The Taiwanese magazines and newspapers with advertisements by the 2nd Plaintiff by reference to "養樂多" are available in Hong Kong at the library of Kwang Hwa Information and Culture Centre and also available to passengers on board of Dragon Airlines' flights from Taiwan to Hong Kong. A wide selection of promotional material of the 2nd Plaintiff were placed before this court. Invariably, the name "養樂多" was used together with the English name "Yakult" and the distinctive bottles used by all companies within the Yakult group all over the world, including Hong Kong. The logos and colour scheme in the packaging adopted by the 2nd Plaintiff were also similar to those adopted in Hong Kong. To illustrate the point, I attach to this judgment copies of a number of photographs of exhibits produced at the trial. Exhibit "P-3A" is a photograph of the Yakult bottles used all over the world. Also, one can compare the packaging and logos of the products in Taiwan as shown in Exhibits "P-6A" and "P-7A" with that used in Hong Kong in Exhibit "P-10A". One can therefore readily associate "養樂多"in Taiwan with Yakult products in Hong Kong.

21. As for the name "Yakudo", the Plaintiff said the Japanese pronounced the word "Yakult" in a manner very similar to "Yakudo". Hence, to a Japanese, "Yakudo" could be regarded as a phonetic adulteration of "Yakult" and the two are confusingly similar. Again there is no doubt that Yakult is a very well-known brand in Japan. On top of the sales figures and advertising expenses incurred, Yakult had received a large number of awards by various Japanese authorities over the years. Mr Sakai, the general manager of the 1st Plaintiff, gave evidence as to sale of the products since 1940's and the successful development of the 1st Plaintiff since 1955. His evidence in these regards was not challenged. The latest company profile (2003-2004) was also produced as exhibit P-16. The sales for the fiscal year ended March 2003 amounted to 160,826 million yen.

22. The Plaintiffs contended that due to a significant number of Japanese residing in Hong Kong and large number of Japanese visitors to Hong Kong, the use of the name "Yakudo" by the Defendants would cause confusion. According to the statistics of the Consulate General of Japan, the numbers of Japanese residents in Hong Kong are as follows,

Year	Japanese residents in Hong Kong
2000	22,924
2001	24,356
2002	26,267

23. The number of Japanese visitors to Hong Kong, based on the statistics from the Census and Statistics Department, are as follows,

Year	Japanese visitors to Hong Kong
2001	1,337,000
2002	1,395,000

24. Apart from the names or marks "養樂多" and "Yakudo", the Plaintiffs also complained about the intended use by the Defendants of the Yakult bottles to market its products. The Yakult bottle is in a distinctive shape as shown in the photograph Exhibit "P-3A". It was designed by a Japanese company in 1965 at the request of the 1st Plaintiff. All intellectual property rights relating to the bottle had been assigned to the 1st Plaintiff. According to Mr Matsuzono, it was first used by the 1st Plaintiff in Japan in 1968 and by the 2nd Plaintiff in Taiwan in 1971. According to Mr Eizawa, the distinctive Yakult bottle has been used in Hong Kong since 1971. The bottle was registered as a trademark under registration number 2535 of 1982 with effect from 23 July 1981.

25. Under Paragraph 55 of the Amended Agreed List of Issues, the Defendants admitted that on 9 August 2002, the 1st Defendant's PRC factory provided the Plaintiffs' investigator with an empty bottle identical in size and shape to the Yakult Bottle and confirmed that the bottle has been approved as the bottle for the 1st Defendant's products. As mentioned, Mr Ho conceded on 15 May 2003 that the 1st Defendant intended to use that bottle in mainland China.

26. Further, the Plaintiffs also alleged under Paragraph 16A of the Re-re-re-amended Statement of Claim that misrepresentations were made by the Defendants on a website of the 1st Defendant at www.hk-yakudo.com. It is contended that certain statements and features posted at the said website created a confusing impression that the 1st Defendant was associated with the 2nd Plaintiff. Apart from the use of the names and marks "Yakudo" and "養樂多" on the website, the Plaintiffs also complained about the use of the word "Yakult" in the email address of the 1st Defendant, hk.yakult@msa.hinet.net. In addition, there were statements published on the said website which the Plaintiffs took objection on the ground that the same misled the public into believing that the 1st Defendant had an association with the 2nd Plaintiff.

27. The website is maintained by the 1st Defendant with a server in Taiwan. As in the case of all websites on the internet, it is accessible by a computer in Hong Kong. This gives rise to an interesting point of law as to whether this could be regarded as an act of passing off in Hong Kong. Leading counsel for the Plaintiff, Mr Liao SC referred this court to some authorities on this point and I shall come back to the same later.

28. Under the particulars pleaded under Paragraph 14 of the Re-re-re-amended Statement of Claim, the Plaintiffs made references to an article published on 11 September 2001 in a newspaper "時事速報" and the company brochure of the 1st Defendant ["the Brochure"] and contended that misrepresentations were made in these documents as to the connection between the 1st Defendant and the Plaintiffs. These were pleaded as particulars of the wrongful use or threatened use of the names and marks "Yakudo" and "養樂多" and I shall consider the same in that context.

29. The article was originally published in a Taiwanese newspaper called Economic Times (經濟日報). It was then quoted by "時事速報" which is a Japanese language news bulletin published on a daily basis in Hong Kong by Jiji Press Hong Kong. It is circulated amongst the Japanese community in Hong Kong. During the course of the trial, counsel referred to the original article published in Taiwan ["the Article"]. It must however be noted that the publication in the news bulletin of "時事速報" is only a short summary. That can be found at Bundle F15 at p. 7770 with the relevant extract at p. 7774. An English translation was provided at Bundle F15 at p. 7769. The translation was not certified but there has not been any objection as to its admissibility by counsel for the Defendants. As far as the translation showed, the writer of the summary certainly confused the 1st Defendant with the 3rd Plaintiff. It referred to "Hong Kong Yakult Co. Ltd" planning to expand into mainland China and its registration of "養樂多" as a trademark in China. It reported the construction of plant in Kunshang. It also stated that Hong Kong Yakult was established by the Li family, the principal shareholder of the 2nd Plaintiff. The Article published in Taiwan is much longer and contained more details.

30. As far as publication in Hong Kong is concerned, there is no evidence that the Article in the Taiwanese newspaper had been published here in its original form. Bearing in mind the manner in which the Plaintiffs pleaded their case, I shall consider the Article as background material showing the alleged intention on the part of the Defendants to use the names and marks "Yakudo" and "養樂多" instead of treating it as a separate act of passing off.

31. There is evidence that the Brochure had been distributed in Hong Kong. A private investigator employed by Kennoway Investigations Limited had obtained a copy of the Brochure from Mr Tony Lam, a director of the 1st Defendant, on 16 May 2002 at its office on 8th Floor, Pearl Oriental House, 60 Stanley Street, Central. The extent to which the Brochure had been distributed in Hong Kong apart from this occasion is not clear. In any event, as mentioned, the Plaintiffs only pleaded the Brochure as particulars of the use or intended use of the names and marks "Yakudo" and "養樂多". Hence, I would only deal with the same as alleged acts of passing off by using these names and marks in Hong Kong.

32. Under Paragraph 52 of the Amended Agreed List of Issues, the Defendants admitted that the 1st Defendant intends to use the names and marks "Yakudo" and "養樂多" as well as the mark "Yakudo養樂多 & device" in respect of its business and products in Hong Kong and mainland China. The "Yakudo養樂多 & device" is the subject matter of a pending application by the 1st Defendant at the Trade Mark Registry under Application No. 9461 of 2001. The Plaintiffs are opposing that application. The device consisted of the words "Yakudo" and "養樂多" within three circles in a square shape device. I was told that the application has yet to be determined.

33. As regards the second cause of action, infringement of registered trade marks, the Plaintiffs averred that the use and intended uses by the Defendants of the names and marks "Yakudo" and "養樂多" and bottle identical to the Yakult Bottle were infringement of the registered trade marks owned by the 1st Plaintiff pleaded in Paragraph 18 of the Re-re-re-amended Statement of Claim. The marks included "Yakult", "Yakult Bottle" and "養樂多".

34. As regards the third cause of action, the Plaintiffs relied on a new section in the Trade Marks Ordinance Cap. 559. The Plaintiffs contended that "Yakult" and "養樂多" are well known marks within the meaning of Section 63 of the Ordinance. It is said that the Defendants' use and intended uses of the names and marks "Yakudo" and "養樂多" in the company name of the 1st Defendant and the device in the pending trade mark registration in application No. 9416 of 2001 and at the website www.hk-yakudo.com after the section comes into operation on 4 April 2003.

35. The Plaintiffs further sought aggravated damages or alternatively exemplary damages by reason of the Defendants' dishonest and flagrant disregard of the Plaintiffs' rights and misrepresentation as to the outcome of the interlocutory hearing on 28 August 2002. In respect of the latter complaint, I have set out the material facts in my Decision of 13 January 2003 (reported at [2003] 1 HKLRD 391).

The activities of the Defendants

36. Mr Ho submitted in his written closing submissions that the Defendants have not commenced making or selling their products in Hong Kong. However, that does not mean that the Defendants have not made any use of the trade names or marks "Yakudo" and "養樂多" in Hong Kong. Mr Liao referred to the decision of Rogers J (as he then was) in Stichting Greenpeace Council v Income Team Limited [1997] FSR 149 concerning what constitutes trademark use under the old Trade Marks Ordinance. By reference to the relevant provisions in the ordinance, Rogers J held that trade mark use was a use which indicates a connection between the goods and the owner of the name and it was not confined to indication of manufacturing origin. It included selection, certification, dealing with or offering for sale. On the facts of that case, it was held that, amongst other things, use of a name on sale memos, credit card receipts, mailing list application forms, business cards and use as the name of the defendants' shops constituted trade mark uses. At p. 162, His Lordship said the question is whether such a use was a use in relation to goods and it was a question of fact.

37. In respect of the use of the name as the name of the business, the following observations were made at p. 163,

"But even in cases where the name "GREEN PEACE" is used by the first defendant as the name of its business the next question to be asked is what is that business. It is, as I have held, a business which consists of selecting the goods to be purchased by the first defendant and acquired for the purposes of sale in the defendants' own shops. It is therefore a business intimately connected with goods ... By using the name "GREEN PEACE" outside the shop the first defendant is clearly using the name in relation to the goods. The public associate and have been lead to associate the first defendant's business as one connected with the selection and retailing of goods. The use of that name outside the place of business where significant part of that business from the public's point of view is carried on is clearly a use in relation to goods."

By similar taken, the uses by the 1st Defendant of the names "養樂多" and 'Yakudo' were in respect of a business of producing and selling goods and therefore constituted uses in relation to goods.

38. Although the old Trade Marks Ordinance has been replaced by the new one since 4 April 2003, the old law in respect of infringement is still applicable because of the effect of the transitional provisions under Section 4 of Schedule 5 to the new Ordinance. In particular, Section 4(2) provides that old law applies to infringement committed before 4 April 2003 and Section 4(3) provides that it is not an infringement of an existing registered mark to continue any use which did not constitute an infringement under the old law. All the registered marks relied on by the Plaintiffs in this action are existing registered marks as defined under Section 1(1) of Schedule 5.

39. In the context of passing off, there has been a long line of cases establishing that the court would grant injunctive relief against a defendant who set up a company by an identical name or one similar to the name of another trader that would appropriate the goodwill of the latter. Even if the defendant did not start trading under that name, the court will require the name to be changed: see Panhard et Levassor v Panhard Levassar Motor Company Limited (1901) 2 Ch 513; Suhner & Co. AG v Suhner Ltd [1967] RPC 336; Fletcher Challenge Ltd v Fletcher Challenger Pty Ltd [1982] FSR 1; Glaxo Plc v Glaxo-Wellcome Ltd [1996] FSR 388; Direct Line Group Ltd v Direct Line Estate Agency Ltd [1997] FSR 374. In British Telecommunications Plc v One in a Million Ltd [1999] FSR 1, Aldous LJ reviewed these cases and considered that the rationale behind was that the incorporation of the company under such a name constituted an instrument of deception in the circumstances. At p. 18, His Lordship said,

"In my view there can be discerned from the cases a jurisdiction to grant injunctive relief where a defendant is equipped with or is intending to equip another with an instrument of fraud. Whether any name is an instrument of fraud will depend upon all the circumstances. A name which will, by reason of its similarity to the name of another, inherently lead to passing off is such an instrument. If it would not inherently lead to passing off, it does not follow that it is not an instrument of fraud. The court should consider the similarity of the names, the intention of the defendant, the type of trade and all the surrounding circumstances. If it be the intention of the defendant to appropriate the goodwill of another or enable others to do so, I can see no reason why the court should not infer that I will happen, even if there is a possibility that such an appropriation would not take place. If, taking all the circumstances into account the court should conclude that the name was produced to enable passing off, is adapted to be used for passing off and, if used, is likely to be fraudulently used, an injunction will be appropriate."

40. In fact, the Defendants have carried on other activities in Hong Kong apart from the incorporation of the 1st Defendant. The 1st Defendant has filed an application for registration of "Yakudo養樂多 & device" at the Trade Mark Registry under Application No. 9461 of 2001. According to company search, it established an office at 8th Floor Pearl Oriental House, 60 Stanley Street, Central on 16 May 2001. On 13 June 2001, an agent of the 1st Defendant Messrs Yuen & Partners filed the said application for trade mark registration for it. According to the Brochure, there are 10 staff in that office, 4 for management, 2 for administration and personnel, 2 for treasury and accounting, another 2 for sales and marketing. In his evidence, the 2nd Defendant said that the 2 staff for sales and marketing were concerned with the future sales of the 1st Defendants' products in Hong Kong.

41. Name cards, letterheads and envelopes bearing a logo and the names of Yakudo養樂多 were printed. Board meeting of the 1st Defendant was held on 7 January 2003 in Hong Kong concerning the production of the 1st Defendant in Guangzhou (see Bundle F20 p. 8711).

42. The evidence of Mr James Kennoway Allan, the managing director of Kennoway Investigations Limited in his first affidavit of 20 June 2002 was adopted as evidence at the trial. Mr Ho did not require the witness to attend for cross-examination. His evidence clearly showed that the 1st Defendant did answer enquiries from foreign traders at its Hong Kong office and told others that the 1st Defendant's products were lactobacillus product similar to those of the Plaintiffs. On 16 May 2002, an investigator visited the office of the 1st Defendant at Pearl Oriental House. The name and the logo of the 1st Defendant were displayed outside the unit. A director of the 1st Defendant, Mr Tony Lam handed his business card to the investigator and gave information to him about the business plan of the 1st Defendant. Production was expected to commence towards the end of 2002 and initially the drinks would be sold in mainland China under the names Yakudo and 養樂多. A copy of the Brochure was given to the investigator.

43. Investigation was also made by Kennoway Investigations Limited about the activities of the Defendants in mainland China. These were set out in the Second Affidavit of Mr Allan filed on 20 August 2002. Since I will focus on torts committed in Hong Kong, those activities in mainland China would only provide a background as to the intention of the Defendants. I shall not recite at length what was said in that Second Affidavit. I note that according to the information provided by a Mr Chen at the Shanghai office of Yakudo Foodstuff (China) Co. Ltd, that office had a staff of 60 and a factory at Kunshan was expected to be completed by the end of 2001. In addition, there were plans to set up further factories in Guangzhou, Beijing, Wuhan and Sichuen. An empty bottle was given to the investigator. Mr Chen said that their products would be sold in such bottles. The bottle was identical in shape to that of the Yakult Bottle. It was produced as Exhibit P-15. Yakudo Foodstuff (China) Co. Ltd (養樂多食品 (中國)有限公司) is a company incorporated at Kunshan in the Jiangsu Province. It is a subsidiary of the 1st Defendant. The other shareholder of this company is Tao Kuang Development Limited, a Taiwanese company controlled by the 2nd Defendant. Likewise, the company operating the Kunshan factory, Yakudo Foodstuff Biology Science Co. Ltd (養樂多食品生物科技(昆山)有限公司) ["Yakudo Kunshan"] is also a subsidiary of the 1st Defendant with Tao Kuang Development Limited as the only other shareholder.

44. Another visit was made to the Hong Kong office of the 1st Defendant by an investigator of Kennoway Investigations Limited on 28 April 2003. This was documented in the witness statement of Mr Allan dated 3 September 2003. An appointment was made by the investigator with Mr Tony Lam to discuss potential investment in the 1st Defendant. During the visit, Tony Lam claimed that the 1st Defendant planned to go public on the Hong Kong GEM Board at the Hong Kong Stock Exchange and the target was to have a listing hearing in February 2004. He said that in order to prepare for that application and to gain a presence in Hong Kong, the 1st Defendant would start selling Yakudo drinks here on a limited scale in October or November 2003. The 1st Defendant was looking for investor, albeit not very actively, and aimed at offering 5% to 15% of its shares to pre-IPO investors before the company was listed.

45. In late 2002, products of Yakudo Foodstuff (China) Co. Ltd were launched in Shanghai. They were sold in bottles slightly different from the Yakult Bottle. Exhibits P-11, P-12 and P-13 were bottles used by them and I attach to this judgment copies of photographs of the same which were P-11A, P-12A and P-13A. It can be seen that the bottles are still very similar to the Yakult Bottle and the box shape device printed on the bottle is similar to the box shape device used by the Plaintiffs. The same colour scheme as that of the Plaintiff's packaging in red and green was used. Although the name "雅樂多" was introduced and printed on the bottles, it was also printed in prominent wordings (in size not smaller than those for "雅樂多") that the manufacturer is養樂多食品 (中國)有限公司. These are the white Chinese characters in the red strip about 1/4 down from the top of the bottle. These were not completely shown on the photographs attached. In Exhibit P-13 which were marked with dates in May 2003, there were specific description printed on the bottle as well as the label at the top that the bacteria was "活性養樂多乳酸菌" and "養樂多菌" respectively. Further, in Putonghua, "雅樂多" is pronounced in a way similar to "養樂多".

46. Apart from the contest in mainland China as to the registration of the trade mark "養樂多", the Plaintiffs were also opposing attempts by Yakudo Kunshan to register marks like "雅樂多" and "益樂多". There are ongoing proceedings in mainland China and it is not the function of this court to decide matters which are the subject matters of those proceeding. That should be governed by the law in mainland China.

47. However, given the relationship between the Defendants and these companies in mainland China and the absence of production facilities in Hong Kong, it is reasonable to infer that the products which the Defendants intend to sell in Hong Kong in the future would be in similar packing and the words "Yakudo" and "養樂多" would be prominent features printed on the Defendants' bottles. Mr Ho said in his closing submission that any use or intended use of the name or mark "Yakudo" and "養樂多" on the Defendants' products to be launched would be subject to the condition that the Defendants could lawfully use the same. To me, that is a clear intimation of intention to use these marks in relation to the lactobacillus drink of the Defendants unless restrained by the court. It is expressly admitted by the Defendants under Paragraph 52 of the Agreed List of Issues that the 1st Defendant intends to use the trade names and marks "Yakudo" and "養樂多" as well as the mark "Yakudo 養樂多 & device" in respect of its business and products in Hong Kong. The 2nd Defendant also said so in his evidence.

48. Further, this court can take into account of the activities of these subsidiaries of the 1st Defendant in assessing whether the Defendants set out with an intention to pass off their products as connected with the Plaintiffs.

The credibility of the 2nd Defendant and the intention of the Defendants to misrepresent

49. In the context of the claims based on infringement of registered trade marks and Section 63, one needs not concern with the question whether the Plaintiffs have a goodwill in Hong Kong vested in the name "養樂多". The mark has been registered here and the Defence did not challenge the registration. The issue seems to be whether the Defendants intended to use this mark in the course of trade. As to the Yakult Bottle, there cannot be any doubt that it represents the Plaintiffs' products to the consumers and it is a registered mark. Again the issue is whether the Defendants intended to use the same for the purpose of trade here. As for Yakudo, one should also consider whether it is confusingly similar to "Yakult", the registered marks of the Plaintiffs. Of course, in respect of the Section 63 claim, one needs to consider whether these marks come within the meaning of well known marks under the Ordinance.

50. The claim for passing off is more complicated. It entails the examination of the question whether the use of the names and marks "養樂多" and "Yakudo" in Hong Kong constituted any misrepresentation by the Defendants that their products were those connected with the Plaintiffs. Hence, the Plaintiff adduced evidence by way of some survey results and called several consumer witnesses to testify at the trial. Mr Ho made a number of observations regarding these evidence and I shall deal with the same in the section dealing with the question of misrepresentation.

51. The most controversial witness is of course the 2nd Defendant and Mr Liao took up 4 days in cross-examining him. The 2nd Defendant adopted his affirmations and witness statement as his evidence-in-chief. Mr Liao submitted in his closing speech that the contradictions in the evidence of the 2nd Defendant is all over the place and his evidence should be rejected.

52. There is a dispute as to who made up the name "養樂多" in the first place. The 2nd Defendant claimed that it was coined by his mother whilst the Plaintiffs said it was created by a consultant of the 2nd Plaintiff when Yakult was launched in Taiwan. I agree with Mr Liao that it is quite immaterial who coined the name because ever since the launch of that name, it had been associated with Yakult and there cannot be any doubt that the goodwill in that name vested in the 1st and 2nd Plaintiffs. Hence, it was the 1st Plaintiff who granted a licence to the 2nd Plaintiff to use the mark.

53. As a matter of fact, I do not believe the story of the 2nd Defendant. He admitted that he was still very young when the 2nd Plaintiff became associated with the Japanese. He was not personally involved. He said he was told by his parents about these matters and he remembered distinctively the coining of the name by his mother as it made up of 81 strokes, which he alleged to be a sign of good luck. But the name "養樂多股份有限公司 " actually consisted of less than 81 strokes. For reasons canvassed hereinbelow, I find the evidence of the 2nd Defendant to be unreliable and I do not regard him as an honest witness.

54. The lack of credibility on the part of the 2nd Defendant is well illustrated by his evidence concerning the Yakult Bottle. Despite the admission by Mr Ho on behalf of the Defendants that the Defendants intended to use the Yakult Bottle, the 2nd Defendant qualified the same in his testimony in the afternoon of 5 November 2003 by saying that he only intended to use it upon approval by the Chinese authority. He then revealed that he had made a design patent application for the bottle in mainland China. He said if his application were successful, he would have use the Yakult Bottle. In my Decision of 3 July 2003, I have ordered discovery by the Defendants in respect of documents relating to the Yakult Bottle. Despite that order, no discovery had been given by the Defendants as to the said design patent application. Mr Ho informed the court that he had advised the Defendants that the matters in mainland China were irrelevant and need not be disclosed. With respect, that advice is patently incorrect as I have fully explained in my Decision of 3 July 2003 why documents relating to the Yakult Bottle are relevant and should have been made available for inspection.

55. Due to the wrong advice from Mr Ho, the Plaintiffs were deprived of the benefit of my order made on 3 July 2003. This is unsatisfactory as proper discovery is important to the fair trial of an action. However, Mr Liao was prepared to continue with the trial. Notwithstanding the correction of the misconception of Mr Ho by this court, the 2nd Defendant could only produce as "D-1" a design patent certificate for a bottle on 6 November 2003 and the defence produced no further documents regarding their design of the bottle up to the very end of the trial. On that certificate, the designer was stated to be one Wang Tsai Hsia, a shareholder and director of the 1st Defendant. The 2nd Defendant was said to be the owner of the Design Patent. However, the certificate did not show the design that was registered. Through the diligence of the Plaintiffs' solicitors, a document setting out the particulars of the registration together with a picture showing the bottle registered by the 2nd Defendant was produced as "P-22". The bottle shown in that picture was plainly a Yakult Bottle of the 2nd Plaintiff. It bore the 2nd Plaintiff's logo and product name. Although the 2nd Defendant initially tried to suggest otherwise, in the end he had to accept that it was identical to the 2nd Plaintiff's bottle.

56. If the Defendants had come up with a design of their bottle which happened to be very similar to that of the Plaintiffs, they should have been able to produce their design drawings and related documents at the trial. Even taking into account of the wrong advice of Mr Ho, there was ample time for them to do so between the dispelling of the misconception on 6 November and the end of closing submissions on 18 December 2003. Further, it is difficult to see if they had their own design, why would the 2nd Defendant used a picture of the 2nd Plaintiff's bottle for registration. I have no hesitation in finding that the 2nd Defendant simply took the Yakult Bottle of the 2nd Plaintiff to apply for his Design Patent registration in mainland China. At the time of the application for such registration, he knew perfectly well that he was using the design of the Plaintiffs and Wang Tsai Hsia did not contribute any input as designer. He also knew that he had no right to claim himself to be the owner of the design.

57. This explains why the Defendants decided not to use the Yakult Bottle after the Plaintiffs took out legal proceedings against them. The certificate showed that the patent design was in fact registered on 21 December 2001. Hence, contrary to his explanation on 5 November 2003, the 2nd Defendant was not waiting for the approval of his patent design application in withholding the use of this bottle. Further, the evidence of the investigator mentioned above clearly shown that the bottle had been used by the 1st Defendant's factory in mainland China by way of sample in August 2002.

58. When confronted with the fact that the design patent application had been granted and therefore his earlier explanation for the non-use of the Yakult Bottle could not be correct, the 2nd Defendant gave another explanation. He suggested that the bottle factory required more time to prepare for the manufacturing of the Yakult Bottle due to the need to make the mould. I must also reject this second explanation by the 2nd Defendant. This was contradicted by what was said by his own counsel in the morning of 6 November 2003. Mr Ho informed this court that the Defendants ordered the Yakult Bottles from a factory and the relevant minute was at Bundle F20 at p. 8711. Mr Ho also told this court that the Defendants did not commission any design. Further, the evidence of the investigator proved that the Defendants had the Yakult bottles ready for use in August 2002.

59. When he realized that this explanation could not hold water, the 2nd Defendant resorted to a third explanation. He said he abandoned the Yakult Bottle because it would be more costly to produce the same as more material was required for the Yakult Bottle than the bottle now used by them in Shanghai. As Mr Liao put to the 2nd Defendant in cross-examination, if that were so, why did the 2nd Defendant apply for the registration of the design patent in the first place. These revisions by the 2nd Defendant as to the reasons for stopping the use of the Yakult Bottle, in my judgment, is the hallmark of a witness who did not bother to tell this court the truth.

60. Another aspect of the evidence which demonstrates the lack of credibility on the part of the 2nd Defendant is his case about his directorship in the 2nd Plaintiff. In the Brochure, he was introduced as a director of the 2nd Plaintiff. The Plaintiffs complained that this was not true. The 2nd Defendant said in Paragraph 62 of his First Affirmation that he had been an alternate director for his mother since 1999. Hence, he tried to justify what was said in the Brochure. In this connection, he relied on a letter of March 1999 signed by his mother to support his claim. For the purpose of the interlocutory proceedings, the Defendants also filed an affirmation by a Taiwanese lawyer Mr Yih to establish that the 2nd Defendant was validly appointed as an alternate director under Taiwanese law.

61. However, this stance was abandoned in the course of the trial. The defence did not call Mr Yih to give evidence. Under cross-examination, after he was confronted with the fact that by March 1999, his mother was no longer a director of the 2nd Plaintiff, the 2nd Defendant finally accepted on 7 November 2003 that he was not a director of the 2nd Plaintiff and the statement in the Brochure was a mistake. He however could not offer any explanation as to why he previously maintained that such statement was justified.

62. I also have doubts about the letter of March 1999. The 2nd Defendant said that his mother was in ill health at that time and therefore signed the letter to enable him to attend board meeting on her behalf. But the record showed that by that time she was no longer a director, hence there is no question of someone attending the board meeting as her alternate. Moreover, if the letter was prepared for the purpose as alleged by the 2nd Defendant, I fail to see why the 2nd Defendant just kept the letter to himself instead of sending the same or a copy thereof to the 2nd Plaintiff for record in 1999. Neither did he attend any board meeting of the 2nd Plaintiff. Further, the 2nd Defendant could not explain why the letter was written in English, a language not that familiar to his mother nor widely used for domestic business purposes in Taiwan. I am not satisfied that the mother of the 2nd Defendant had signed the letter with a view to appoint the 2nd Defendant as an alternate director of the 2nd Plaintiff.

63. The statement in the Brochure that the 2nd Defendant was a director of the 2nd Plaintiff was therefore incorrect and I find that the 2nd Defendant knew all along it was incorrect. Based on the 2nd Defendant's attempt to justify the statement in his First Affirmation instead of admitting the same to be a mistake, I believe that not only was he aware of the inclusion of such an inaccurate statement in the Brochure from the very beginning, he in fact personally approved of the same. I shall come back to his motive in so doing later.

64. Another instance of the 2nd Defendant's belated attempt to dissociate from inaccurate statements made in publication by the 1st Defendant was the press release about the result of the interlocutory proceedings in September 2002. In his Third Affirmation, he tried to defend the press statement of 27 September 2002. He said it was a counter measure to balance an alleged misrepresentation in an article in the Next Magazine in Taiwan. The measure was, according to his evidence in that affirmation, advised by a financial advisor engaged by the 1st Defendant in Taiwan. The purpose was to inform the investing public that the business of the 1st Defendant in mainland China had not been affected by the order made by this court in the interlocutory proceedings. He also said through his investigation, he learnt that the article in the Next magazine was published at the instigation of the 2nd Plaintiff. From what he said in that affirmation, the 2nd Defendant was very much involved in the whole episode.

65. I have already ruled in my Decision of 13 January 2003 that the press release by the 1st Defendant distorted the result of the interlocutory proceedings. The 2nd Defendant seemed to back paddle from his previous stance to justify the statements when he was cross-examined about the same during the trial. He said that it was a conference to introduce the products of the 1st Defendant and only some friends and investors were invited. The press was not invited. He accepted that the statement published did not correctly represent the result of the interlocutory proceedings but he said he did not read it at that time. Although he was at the conference, he said he only sat on the stage when the products were introduced. When he was confronted with the fact that a press release was distributed to reporters at the conference, he said he could not remember. He said he had no means to control what the reporters chose to report. The 2nd Defendant however could not offer any satisfactory explanation as to why the press release was drafted in those terms and he said it was not done at his instructions.

66. Since the Plaintiffs had specifically put the bona fide of the Defendants in respect of this press release into issue in their pleadings, one would expect the Defendants to adduce some evidence from whoever responsible for the organization of the press conference and the drafting of the press release to account for the same. But the only witness called by the defence was the 2nd Defendant who tried to impress this court that he knew nothing about this press release whilst he also adopted the statements in his Third Affirmation as his evidence-in-chief. Given the answers given by the 2nd Defendant under cross-examination, I must reject his explanation for this press release in his Third Affirmation. I do not believe that he had no idea about the contents of the press release before it was published. The 2nd Defendant was the managing director and general manager of the 1st Defendant. He admitted that he was in control of the business of the 1st Defendant and made decisions for the company. The press conference and press release were important to the 1st Defendant. In Paragraph 24 of his Third Affirmation, the 2nd Defendant clearly admitted that he had participated in the preparation of the press conference.

67. In the circumstances, given the lack of bona fide justification for the same, I find that the press release of 27 September 2002 was a deliberate exercise by the Defendants to misrepresent the result of the interlocutory proceedings to the investing public with a view to benefit from it at the expense of the Plaintiffs. I regard this as evidence of propensity on the part of the Defendants to misrepresent the truth when it suits their commercial needs.

68. The 2nd Defendant tried to justify the use of the name "養樂多" by suggesting that it was a name coined by his mother and he followed his parents' instructions to develop a business under this name in mainland China (see Paragraph 71 of his First Affirmation). He also said that he had consulted lawyers about the use of this name before he decided to adopt the same for the 1st Defendant. He emphasized that this was done with the full knowledge and blessings of his parents (see Paragraph 107 of his First Affirmation). He said that due to the absence of business of the 2nd Plaintiff in Hong Kong and the long period of non-use of the name "養樂多" in mainland China, the Plaintiffs had no right in that name in those places. The 1st Defendant was therefore free to use the same for its business. He said announcements had been made in Taiwan to clarify that the 1st Defendant was not connected with the 2nd Plaintiff; hence there was no question of confusion in Taiwan.

69. Whilst he maintained this version by adopting his affirmation as his evidence-in-chief, he changed his evidence when he was cross-examined about the reason for choosing the name "養樂多". He said it was to commemorate his parents as they were the founders of the 2nd Plaintiff. Mr Liao asked the 2nd Defendant whether his parents approved of the use of the name, the 2nd Defendant said it was his personal affair and the parents neither approved nor disapproved. Later, after Mr Liao shown the 2nd Defendant the letter dated 12 December 2001 from the parents to the board of the 2nd Plaintiff, the 2nd Defendant agreed that his parents had asked him to use another name and cancel his registration for the mark bearing this name. The 2nd Defendant said he refused to do so since he had applied for registration. Hence, the choice of this name was not in accordance with the wishes of the parents. To the contrary, it was against their wishes. In such circumstances, it is absurd to suggest that the use of this name was in honour or for the memory of the parents. In fact, the 2nd Defendant accepted under cross-examination that the goodwill attached to the name did not belong to the Lee family as the 2nd Plaintiff was not a Lee family business.

70. Under cross-examination, the 2nd Defendant revealed that his so-called consultation with lawyers about the use of the name was a consultation with his friend who was a lawyer in Taiwan. He asked about the legality of starting a company with this name outside Taiwan. He was told that he needed to go through legal formalities in accordance with the law of the place where the mark was to be used. He did not consult any Hong Kong lawyers. Whilst the consultation did not explain why the 2nd Defendant chose this name in the first place, it shows that he was at least aware of the possibility that this would be challenged by the Plaintiffs and he took on such a risk with his eyes open.

71. I do not believe that the choice of the name "養樂多" by the Defendants was to commemorate the parents. Having regard to other steps taken by the 1st Defendant to market and promote its products, the inevitable conclusion is that the Defendants deliberately chose this name to ride on the reputation of the 2nd Plaintiff. These other steps include the use of the name "Yakudo" which sounds similar to "Yakult" to Japanese (as evidenced by the Japanese TV advertisement included in P2), the intention to use the Yakult Bottle, the choice of a red and green colour scheme for the packaging which is the same as those adopted by the Plaintiffs, the use of the same box shape devices for logos, the application for registration of the name "Yakult" in mainland China by a company controlled by the 2nd Defendant, the deliberate incorrect reference to the 2nd Defendant as a director of the 2nd Plaintiff in the Brochure, and adoption of "hk.yakult@msa.hinet.net" as the email address for the 2nd Defendant. I have already referred to some of these in discussing the activities of the Defendants.

72. The 2nd Defendant had offered some explanations about these similarities in his testimony. As regards the name "Yakudo", he said he derived it from the word "yogurt". I do not find that convincing and I do not believe him. Under cross-examination, he conceded that there was "a little bit of truth" in the suggestion by Mr Liao that inspiration of the name "Yakudo" came from "Yakuruto". It was agreed under Paragraph 54 of the Agreed Facts that the Japanese pronounced Yakult as "Yakuruto".

73. I have already dealt with the bottles. As mentioned, even with the modification, the bottle now used by Yakudo Foodstuff (China) Co. Ltd in Shanghai is still very similar to the Yakult Bottle. As regards the choice of the red and green colour scheme, the 2nd Defendant said it was his idea. According to his evidence, he chose red to represent passion and green to represent environmental protection. The 2nd Defendant agreed that the box shape devices in the logos used on the bottles of Yakudo Foodstuff (China) Co. Ltd were similar to the device that had been widely used by the Plaintiffs. He however said that the Yakudo logo was designed by a company in Shanghai. Again I do not find his evidence to be credible. A comparison between P-13 (a Yakudo bottle) with P-7 (Yakult Bottle of the 2nd Plaintiff) inevitably leads one to conclude that the former must have been designed as a modified version of the latter. I cannot accept it was pure coincidence that the designer for Yakudo Foodstuff (China) Co. Ltd came up with a box shape device similar to that of the Plaintiffs. The 2nd Defendant in fact accepted in his evidence that the box shape device which the 1st Defendant applied for registration in Hong Kong on 13 June 2001 (application No. 09416 of 2001) was inspired by the Plaintiffs' mark.

74. On 26 April 2001, a Hunan company called 道光(衡陽)實業發展有限公司 applied for the registration of a mark bearing an oval shape logo (which had also been widely used by the Plaintiffs) bearing the names Yakult and "養樂多" in mainland China. The 2nd Defendant was the major shareholder and the person in charge of this company. When Mr Liao cross-examined him as to the reason for making that application, the 2nd Defendant said he had wanted to use the same because it was distinctive (in his words "a mark different from others") and he liked it. He said the application was not proceeded with subsequently due to a change of mind. Although he did not tell the court what caused the change of mind, in my judgment, it is quite clear that the 2nd Defendant was mindful of the possibility that it might be difficult to defend the use of such a mark that he decided to modify the same. Hence the names "Yakudo", "雅樂多" and "益樂多" were coined. It is again unlikely to be mere coincidence that all these names bear resemblance to the names of the Plaintiffs.

75. It is also noteworthy that although the Yakudo products now on sale in Shanghai were sold as "雅樂多", the name of the company "養樂多食品 (中國)有限公司" was printed prominently with white characters inside a red strip on the bottle. The characters were of the same size as "雅樂多". The name of the company was also printed in smaller green characters at the other side of the bottle. At the lower part of the bottle, the bacteria was named as "活性養樂多乳酸菌". It is quite obvious that the emphasis in this packaging is placed on the words "養樂多" as much as (if not more than) the words "雅樂多". Hence, even though "雅樂多" sounds similar to "養樂多" in Putonghua, it was not good enough for the Defendants. I fail to see why there was a need to place so much emphasis on the words "養樂多" unless the intention was to connect the products with the goodwill under that name. In my judgment, just as what the Defendants had done with regard to the Yakult Bottles, they deliberately adopted names for their companies as well as their products that were similar to or modified from the Plaintiffs' names "養樂多", "益力多" and "Yakult".

76. As to the inaccurate references of the 2nd Defendant as a director of the 2nd Plaintiff in the Brochure of the 1st Defendant, I have already rejected the 2nd Defendant's explanation that it was a mistake. The references would not have any relevance to the promotion of the 1st Defendant unless it was intended to convey to its readers that there was some connection between the 2nd Plaintiff and the 1st Defendant. Bearing in mind that the Brochure was distributed to a lot of Taiwanese investors, they would readily recognize the goodwill of the 2nd Plaintiff associated with the name "養樂多". These inaccurate references simply reinforced the misconception that the 1st Defendant was connected with the 2nd Plaintiff caused by the use of identical names. In view of the lack of credible explanation about the inaccurate references in the Brochure and the fact that the names "Yakudo" and "Yakult" were used interchangeably in referring to the 2nd Plaintiff (see Bundle E1 p. 820 and p. 832), I find that the Defendants intended to achieve such confusion by making these references.

77. As to the adoption of an email address embodying the letters "yakult", the 2nd Defendant said he did not pay attention to the same. He further said since no-one had made use of such an address, the 1st Defendant's engineers decided to use it. The 2nd Defendant said he did not know why the engineers chose that address and it had not occurred to him that he should stop that after learning of it. In short, there is no explanation from the defence as to the adoption of such an email address. There is simply no legitimate reason why the 1st Defendant should apply for and use this address. In my view, it speaks volume of the Defendants' intention in misrepresenting to the outside world that the 1st Defendant was connected to the Yakult group of companies.

78. There is therefore no doubt in my mind that the Defendants deliberately undertook all these measures with a view to pass the 1st Defendant off as having a connection with the Plaintiffs. Of course, this does not necessarily mean that the Defendants have committed acts of passing off in Hong Kong. This court still has to enquire whether the acts of the Defendants constituted misrepresentation to the public that the goods or services of the Defendants are the goods or services of the Plaintiffs. This is the issue I now turn to.

Misrepresentation

79. In Slazenger & Sons v Feltham (1889) 6 RPC 531 at p. 538, Lindley LJ observed,

"One must exercise one's common sense, and, if you are driven to the conclusion that what is intended to be done is to deceive if possible, I do not think it is stretching the imagination very much to credit the man with occasional success or possible success. Why should we be astute to say that he cannot succeed in doing that which he is straining every nerve to do?"

80. The same approach was adopted in the context of foreign goodwill in the so-called soft line cases. In Orkin Exterminating Co. v Pestco Co. of Canada (1985) 19 DLR (4th) 90 at p. 109, Morden JA inferred from the use of the plaintiff's name by the defendant that the name had commercial value in the place where the defendant was trading although the plaintiff did not have a business there. The learned judge adopted this proposition from Restatement of the Law of Torts, tentative draft No. 8 (1963) at p. 113,

"If he imitates the other's trademark or tradename knowingly and acts in other ways to convey the impression that his business is associated with the other, the inference may reasonably be drawn that there are prospective customers to be misled."

To the same effect is the judgment of Henchy J in C & A Modes v C & A (Waterford) [1978] FSR 126 at p. 139 and Lockhart J in Conagra Inc v McCain Foods (1992) 23 IPR 193 at p. 236.

81. Hence, my finding that the Defendants adopted these names with a view to confuse the public that the 1st Defendant was somehow connected with the Plaintiffs has significance on the question of misrepresentation. In any event, there is ample evidence to warrant the conclusion that the use of the name "養樂多" would cause confusion to the public in Hong Kong. The evidence of 9 consumer witnesses was adduced by the Plaintiffs. The Defendants chose not to cross-examine some of them. Some of them are or have been Hong Kong residents who had traveled to or resided in Taiwan (Yiu Wai Fun, Venessa Koo, David Koo, Cheung Shuk Fun, Sofia Chen) and came across "養樂多" there. They believed "養樂多" to be coming from the same source as "益力多" due to the same English name Yakult and/or the same packaging. Some are Taiwanese who had moved to Hong Kong (Cecillia Chi, Alexander Lin). They also believed "益力多" was the same product as "養樂多". Another Taiwanese Ing Chi (who had only visited Hong Kong instead of living here) thought "益力多" to be a different product though he wondered about the same packaging. Thomas Leong did not read Chinese and his evidence was about the similarity between Yakult and Yakudo. He said the Japanese pronounced Yakult similar to Yakudo.

82. It appears that all these consumer witnesses were recruited through the efforts of the solicitors for the Plaintiffs and some were friends, clients or relatives of the solicitors. Despite that, I am satisfied that they were all truthful witnesses and I accept their evidence. Mr Liao drawn my attention to the judgment of Morritt LJ in Neutrogena Corporation v Golden Limited [1996] RPC 473 at p. 498-9 concerning witnesses having association with solicitors acting for a party. I respectfully agreed that the court is entitled to treat the evidence of these witnesses in the same way as members of public at large. Mr Ho submitted that they were biased or at least not proved to be impartial. I do not agree with such criticism. The Defendants had a fair opportunity to cross-examine them and some of them had been cross-examined by Mr Ho. I do not perceive any ground for regarding them as bias in favour of the Plaintiffs.

83. Another criticism of Mr Ho is that they do not represent a fair cross section of the consumer public. He also made the same point with regard to the "survey evidence" of the Plaintiffs. In response, Mr Liao submitted that the purpose of the evidence of the consumer witnesses and the survey was to enable this court to gauge the effect on those who have heard of "養樂多" as to the use by the Defendant of the same name in Hong Kong. I refer to the survey in quote because it is not designed as a survey to represent a cross-section of the general public. The exercise was designed as a witness collection programme. The screening criteria were that all the 153 persons interviewed had visited Taiwan and had heard of "養樂多". I should mention that the total number interviewed was in fact 170, but 17 was discarded due to their refusal to sign the questionnaire. Of those 153 subjects, 132 associated the name with Yakult (86.3%). Amongst those, 128 (83.7%) associated it with "益力多". Different Yakult Bottles were shown to the interviewees: an unmarked one, a bottle of the 2nd Plaintiff, a bottle of the 3rd Plaintiff and a bottle of the 1st Plaintiff. For the unmarked bottle, 150 subjects (98.1%) associated it with Yakult. 135 subjects (88.2%) thought that there was a connection between the 2nd Plaintiff's bottle and that of the 3rd Plaintiff. 99 subjects thought that they were products of the same company.

84. In my judgment, these evidence shows that there is a high likelihood that people who have heard or seen the products of the 2nd Plaintiff in Taiwan would associate the name "養樂多" with Yakult and the Plaintiffs. The more so if the name is used on a Yakult Bottle.

85. Mr David Bottomley, the market research expert called by the Plaintiffs, went further. In his report and his evidence, he expressed the opinion that based on the results from these interviews, one can infer that a representative sample of the population in Hong Kong, not confining to consumers, would probably have been more certain about "養樂多" coming from the same source as "益力多" than the respondents interviewed. His opinion was based on a general proposition that decreasing knowledge of a consumer product tends to put people in a position where they can be more easily confused. As these interviewees were more knowledgeable about the product, the likelihood of confusion amongst the general population should be higher. With respect, whilst that general proposition may be correct in relation to the adoption a mark or name already widely known to the general public in question and hence it could be applied in respect of the Yakult Bottle, this cannot be applied when one is dealing with a foreign mark or name like "養樂多" which had not been widely used in Hong Kong. To be fair to Mr Bottomley, he did not specifically say in his evidence whether his opinion was expressed in respect of the Yakult Bottle or in respect of "養樂多".

86. Another point made by Mr Bottomley in his report is that although the method employed in securing interviewees were quota sample instead of a perfect sample representative of the whole population, the high percentage figures obtained from the interviews (e.g. 88.2 % thought of connection between the Hong Kong and Taiwan Yakult products) show that very high results could be achieved if the exercise is repeated in the general population. In coming to that opinion, Mr Bottomley adopted "margins of error" at 80 %. With respect, whilst one may accept such postulation in respect of similar groups of interviewees who have knowledge about "養樂多", I doubt if the same can be said with regard to the general population in Hong Kong.

87. Insofar as Mr Bottomley attempted to extrapolate from the results of these interviews an opinion about the likely extent of confusion amongst the general population in Hong Kong, he was in effect trying to deduce conclusions from a witness collection programme which could only be drawn from a general survey. The distinction between the two exercises was highlighted by Christopher Wadlow in The Law of Passing-off, 3rd Edn., Paras. 10-28 to 10-31. Mr Bottomley's evidence failed to convince me that I should draw conclusions as to the extent confusion in the general population simply by reference to the results in the witness collection programme over an above what I have already concluded in Paragraph 84.

88. It has to be remembered that although the likelihood of confusion or misrepresentation is a question of fact, it is a question which the court has to come to its own conclusion. Although evidence of consumer witnesses and survey are relevant, they are not conclusive. (See Spalding (AG) & Bros. v AW Gamage (1915) 32 RPC 273; Parker Knoll v Knoll International [1962] RPC 265 at p. 291-2 and GE Trade Mark [1972] 1 WLR 729) In Harrods v Harrodian School [1996] RPC 697, Sir Michael Kerr said,

"Even if there is no evidence of confusion whatever, the court must decide for itself, and may conclude that passing-off has been established ... Thus, it has often been said that the availability of such evidence is important, but not its absence, because it is notoriously difficult to procure such evidence."

89. The Plaintiffs actually encountered difficulties in their witness collection programme. They started off by random sampling in taking telephone numbers from telephone directory in a random fashion. However, the result was unsatisfactory because most of the people contacted refused to take part in interview. Out of a total of 1,075 phone numbers sampled, only 450 respondents were successfully contacted and answered the screening questions. Two screening questions were put to the respondents: whether they had been to Taiwan and whether they had heard of "養樂多". After screening, only 70 met the criteria. Out of those 70, only 14 agreed to attend a follow-up interview and then only 4 actually completed the interview. Hence, the research company adopted another method to locate suitable respondents, viz. personal recruitment. These respondents were recruited through 40 recruiters. The recruiters came from different walks of life. Each of them made use of his or her personal networks to recruit suitable respondents. 166 qualified respondents were secured by this method. Together with the 4 respondents from random telephone contacts, they made up the 170 interviewees.

90. I therefore do not consider the absence of a survey upon a representative cross-section of the general consumer to be fatal to the Plaintiffs' case. As Jacob J put it in Neutrogena v Golden [1996] RPC 473 at p. 485-6,

"The court in a passing off case is not concerned with statistical precision. What it wants to know is whether or not there is a substantial degree of deception or confusion."

91. The products we are concerned with are drinks sold to the general public for domestic consumption. We are not dealing with a product in a specialized field with a limited number of purchasers. This court could therefore use its common sense in assessing the likelihood of confusion after due consideration of the evidence. There is no doubt in my mind that the use of the Yakult Bottle by the Defendants would cause confusion in Hong Kong. As regards the name "養樂多", it is noteworthy that in the random telephone survey, amongst the 450 people contacted through telephone by interviewers acting on behalf of the Plaintiffs, 70 of them had heard of the name "養樂多". Bearing in mind the volume of cross border travel between Hong Kong and Taiwan and the close ethnic, commercial and geographical proximity between the two places, the extensive use of this name by the 2nd Plaintiff in Taiwan in association with the name or mark Yakult and the Yakult Bottle, that Yakult and the Yakult Bottle were also used extensively by the 3rd Plaintiff in Hong Kong, the availability of publications containing advertisement of the 2nd Plaintiff in Hong Kong through internet and other medium, the fact that the name is in Chinese which is a language commonly used in Hong Kong, the image projected by the 3rd Plaintiff in advertisement in Hong Kong as a part of a multinational group and the substantial goodwill and reputation of the 3rd Plaintiff in Hong Kong, giving due weight to the evidence of the consumer witnesses and the results of the witness collection programme that show that local consumers are sophisticated enough to appreciate that different names could be adopted in Hong Kong and Taiwan by companies within the same group and other similar features in product packaging would indicate that they are connected (hence they would readily associate "養樂多" in Taiwan with "益力多" in Hong Kong), I find that the Defendants' use of this name in Hong Kong would cause substantial deception or confusion. In other words, in my view, it is likely that a substantial number of members of the public consumers in Hong Kong would believe that the 1st Defendant's products came from a source connected with the Plaintiffs due to the use of the name "養樂多".

92. Although the following dictum were said in the context of transnational goodwill, I find the same to be equally apposite in dealing with the issue of misrepresentation in the present context,

"Having regard to the travel patterns of the population and mass advertising through television, radio and various publications, the flow of trans-border goodwill is almost inevitable in North America." (per Morden JA in Orkin Exterminating Co. v Pestco Co. of Canada (1985) 19 DLR (4th) 90 at p. 107)

"Modern mass advertising through television (which reaches by satellite every corner of the globe instantaneously), radio, newspapers and magazines, reaches people in many countries of the world. The international mobility of the world population increasingly brings human beings, and therefore potential consumers of goods and services, closer together and engenders an increasing and more instantaneous awareness of international commodities. This is an age of enormous commercial enterprises, some with budgets larger than sovereign states, who advertise their products by sophisticated means involving huge financial outlay. Goods and services are often preceded by their reputation abroad. They may not be physically present in the market of a particular country, but are well known there because of the sophistication of communications which are increasingly less limited by national boundaries, and frequent travel of residents of many countries for reasons of business, pleasure or study." (per Lockhart J in Conagra Inc v McCain Food (1992) 23 IPR 193 at p. 233-4)

93. As regards the name "Yakudo", the only consumer witness who gave evidence was Mr Thomas Leong. He said if he saw a Yakudo product in Hong Kong, he would probably think that it was a parallel import of Yakult, particularly if it was sold in a similar bottle. The witness collection programme was not designed to deal with this aspect of the case. But as I have said, the court is still obliged to come to its independent view on the question of likelihood of confusion even if there is no or very little evidence from the witnesses. Bearing in mind the evidence that Japanese pronounced "Yakult" in a way similar to "Yakudo" and the statistical figures as to Japanese visitors and residents here, I am of the view that the two names are confusingly similar for reasons given below.

94. Mr Liao referred to the decision of Laddie J in Wagamama Ltd v City Centre Restaurants [1995] FSR 713 in which the court held that the defendant's name Rajamama was so similar to the plaintiff's name Wagamama that its use constituted both infringement of the plaintiff's registered trade mark and passing off. Laddie J set out the approach that the court should adopt in comparing the marks or names at p. 720,

"In essence the court would determine whether, as a result of similarities between the marks, goods or services bearing the alleged infringer's mark were likely to be thought to be derived from or connected with the proprietor of the registered mark. In determining whether the marks were too similar the court would bear in mind imperfect recollection (see Aristoc v Rysta [1945] AC 68) and would also consider whether the "idea" of or principal impact conveyed by the marks were so similar that confusion was likely ... Further the test was essentially practical in the sense that the court would not consider just what the marks looked like but also what they sounded like."

95. I also derive assistance from the passages in Kerly's Law of Trade Marks and Trade Names, 13th Edn., Paras. 16-37 to 16-55. In particular, it was said in Para. 16-39,

"A similar question may arise where the defendant has added a prefix or suffix to a word mark of the claimant. ... the sounder approach is to treat the defendant's mark as a combination having "one individual thing which is a monopoly of the plaintiff". It is then necessary to consider how important that thing is to the whole. ... Where a suffix is merely descriptive or simply makes the mark more specific, it will not avoid infringement, so too where it is apt to suggest an addition to a range of goods."

96. As Laddie J said in Wagamama at p. 732, whether there has been infringement is more a matter of feel than science. As far as pronunciation of "Yakudo" is concerned, the most striking feature is the first part of the name which sounds indistinguishable from "Yakult". As the products are to be sold to the general public for domestic consumption, I can envisage that there would be cases where a storekeeper might mistakenly sell a "Yakudo" product to a buyer who asks for "Yakult". Although a majority of Hong Kong residents speaks Chinese, there is also a large number of English speaking residents here. Furthermore, we also have a substantial number of domestic maids who do not speak Chinese and they would have to conduct transactions with storekeepers in English. This problem is compounded by the Japanese element and the way in which Japanese pronounced the word "Yakult". It is common in Hong Kong for Japanese, be they visitors or residents, to conduct their daily shopping in English.

97. I therefore conclude that the use by the Defendants of the names or marks "Yakudo" and "養樂多", whether jointly or independently with a Yakult Bottle would cause substantial confusion in Hong Kong. In relation to the other instances of misrepresentations pleaded in Paragraph 16A of the re-Amended Statement of Claim, it follows from what I have said that the use of the trade and domain names and marks "Yakudo" and "養樂多" at the website constituted misrepresentation. The email address containing the words "hk.yakult" is plainly misrepresenting to a surfer launched into the website that it is a website of or connected with the 3rd Plaintiff. Mr Ho said such misrepresentations should be considered in conjunction with the clarification made by the 1st Defendant in a Taiwanese newspaper on 17 May 2002 and a press release on 27 September 2002. Having read those documents, the highest one can gather from the same was that there was no connection or dealings between the 1st Defendant and the 2nd Plaintiff. They said nothing about possible connection between the 1st or 3rd Plaintiffs with the 1st Defendant. In any event, the website did not refer to these announcement and I fail to see why it could be assumed that a surfer of the website would be aware of the same. The next issue is whether the maintenance of such a website by a server in Taiwan is actionable in Hong Kong.

98. A simplified summary as to what happened when one makes an access to a website can be found in Kerly's Law of Trade Marks and Trade Names, 13th Edn., Paras. 21-21 to 21-22. The question as regards whether the relevant acts take place within the jurisdiction was discussed by the learned editors at Paras. 21-51 to 21-58 by reference to 1-800-Flowers v Phonenames Ltd [2000] ETMR 369 and Euromarket Designs v Peters [2000] ETMR 1025. The former case had been subject to an appeal and the judgment of the Court of Appeal was delivered on 17 May 2001, see [2001] EWCA Civ 721. Buxton LJ was not persuaded that the mere access to a website by a surfer on the internet constituted use of a mark appearing on the webpage within the jurisdiction by the owner of the website. But there is a caveat in paragraph 138 of the judgment,

"... the very idea of "use" within a certain area would seem to require some active step in that area on the part of the user that goes beyond providing facilities that enable others to bring the mark into the area."

In so saying, Buxton LJ in effect rejected the submission of counsel for the appellant that access by a customer to a site led to the appearance on screens within the jurisdiction and such interactive use of the web-site was use by the owner (see Para. 135 of the judgment). His Lordship then continued,

"Of course, if persons in the United Kingdom seek the mark on the internet in response to direct encouragement or advertisement by the owner of the mark, the position may be different ..."

The Court of Appeal did not give any definite answer as to whether that would convert the use on the webpage to a use within the jurisdiction.

99. Mr Liao urged this court to adopt the test set out in Kerly at Para. 21-57, viz. the use of a mark on a foreign website would be a use in Hong Kong if objectively speaking the website is aimed at or intended for consumers in Hong Kong, even if Hong Kong is only one of the intended markets. He further submitted that on the facts of the present case, the website of the 1st Defendant was aiming at Hong Kong as one of its markets. Mr Ho made no specific submission on this point.

100. I agree that as a matter of fact, Hong Kong surfers are intended to be at least one of the target group of audience for the website. The relevant factors are as follows: the website is for the promotion of the 1st Defendant, a Hong Kong company, the name of the 1st Defendant emphasized it is Hong Kong company, it was expressly stated that the 1st Defendant used Hong Kong as a base for developing its international market ("立足香港, 展望世界"), the use of the prefix "hk" in the email address. Further, the 1st Defendant intended to secure a public listing of its stocks in Hong Kong and it must be within the contemplation of the Defendants that investors in Hong Kong would visit the website for its own promotion.

101. In view of the judgment of Buxton LJ, I am less certain as to whether the test advocated by Mr Liao is the correct test to determine the use of a mark on a foreign website constituted use within the jurisdiction. I note that on the facts of both 1-800-Flowers and Euromarket Designs, the court held that the use on the foreign sites did not amount to use within the United Kingdom. Hence, what was said in those judgments as to what might (as opposed to what would not) constitute use within the jurisdiction were only obiter. Unlike the example of amazon.com given by Jacobs J in Euromarket Designs, the site of the 1st Defendant is not a site on which transactions could be conducted. I prefer to deal with this part of the claim by regarding the website and the email address as instruments of fraud in passing off sense. The court has jurisdiction to grant injunctive relief where a defendant is equipped with an instrument of fraud (see British Telecommunications v One in a Million [1999] 1 FSR 1 at p. 18). Bearing in mind that the Defendants' intention to seek a listing at the Stock Exchange of Hong Kong, it is likely that publicity would be given in Hong Kong as to the website and the email address of the 1st Defendant. Even if the uses on the website so far do not constitute uses within Hong Kong, I see no reason why injunctive relief could not be granted on a quia timet basis.

Likelihood of damages

102. Given that both the Plaintiffs and the 1st Defendant sells the same kind of products, viz. lactobacillus drink, once it is concluded that the names or marks used by the 1st Defendant are likely to cause confusion with those of the Plaintiffs, the likelihood of damages is self-evident. It is plain that they are trade rivals competing in the same field. It does not matter that the 1st Defendant has yet to launch its products in Hong Kong. The Defendants admitted that the 1st Defendant intended to use the names and marks "Yakudo" and "養樂多" in Hong Kong. The use must be in relation to lactobacillus drink as this is the main (if not the only) product of the 1st Defendant. As mentioned, there is also evidence to show that the Yakult Bottle or bottles similar to the Yakult Bottle would be used.

103. The Plaintiffs have no control over the products of the 1st Defendant. Very close supervision has been exercised by the 1st Plaintiff in respect of Yakult products all over the world to ensure their quality and hygiene. Since we are dealing with products for human consumption, this must be a very important factor. Although the Defendants claimed that they also paid much attention in these regards, they have not produced any material as to their research on the bacteria and as to their production process. Any mishaps caused by the Defendants' products could lead to serious damages to the reputation of the Plaintiffs.

104. Further, apart from likelihood of damages flowing from the products of the 1st Defendant, damage would also be caused by the dilution of the reputation in the names "養樂多", "Yakult" and the Yakult Bottle and the wrong association between the Plaintiffs and the Defendants by the Defendants' use of "養樂多", "Yakudo" and the bottles. In Harrods Ltd v Harrodian School [1996] RPC 697 at p. 724, Sir Michael Kerr said the following about the relevant damages in passing off context,

"Loss of distinctiveness causes damage to a reputation for excellence, and loss of trade will ultimately follow. The authorities show two relevant propositions in this regard. First, a debasement or dilution of the plaintiff's reputation, as the result of the defendant, is a relevant head of damage. Secondly, if the act which constitutes the passing-off has the effect of raising in people's minds the mistaken belief of a connection between the defendant and the plaintiff, but which is in fact non-existent, then the court will have regard to the fact that the plaintiff has, to that extent, lost control of his reputation, and that he has therefore suffered damage to his goodwill by a potentially injurious association with the defendant against which the court will protect him by injunction."

105. This would be the answer to the contention of the defence that since the 2nd Plaintiff could not sell in Hong Kong in any event, it suffers no damage. The fact that the activities of the Defendants in Hong Kong would have a spillover effect in Taiwan in terms of dilution of reputation and mistaken connection is sufficient. I recognize that in so holding, I adopt the rationale of the soft line cases cited at the beginning of this judgment as opposed to the hard line cases. Like other Hong Kong judges who had dealt with the same point before, I find the reasoning of the soft line cases to be more in line with the present day commercial needs and reality. Like Mr Liao SC, I also find the policy considerations set out in the judgment of Morden JA in Orkin to be most persuasive.

106. Another aspect of likelihood of damage to the Plaintiffs would be that the Defendants' activities would deprive the Plaintiffs of their rights to utilize the goodwill and reputation associated with the name "養樂多" in Hong Kong. Although up to now, this name has not been used extensively in Hong Kong, I have concluded that as a matter of fact there is a substantial number of members of the public in Hong Kong who would associate this name with the goodwill of Yakult and "益力多". In other words, the name "養樂多" does have a commercial value in Hong Kong in terms of goodwill. The 1st Plaintiff has registered "養樂多" in Hong Kong and there is no reason why the Plaintiffs should be deprived of the opportunity of using the same in Hong Kong.

107. Hence, the Plaintiffs have established a case in passing off against the 1st Defendant and should be entitled to relief, including injunctive relief, accordingly.

Infringement of registered trade marks

108. For reasons already given, the trade marks relied upon by the Plaintiffs were existing marks and the old law on infringement is relevant. All the marks relied upon by the Plaintiffs were registered under Part A and were in respect of class No. 29. The goods covered included dairy products or fermented milk beverages. The 1st Plaintiff is the registered owner of the trade marks in Hong Kong and the 3rd Plaintiff is the registered user for the Yakult mark.

109. There is no doubt that the 1st Defendant's uses or intended uses of the names or marks "養樂多", "Yakudo" and the bottles are in respect of lactobacillus drinks which are goods coming within the registered category. Applying the test in Stichting Greenpeace Council v Income Team Limited [1997] FSR 149, the uses and intended uses by the 1st Defendant in the future are in relation to goods in the course of trade. Given my conclusion as to the likelihood of confusion, I readily find that such uses by the 1st Defendant constitute infringement of these registered trade marks under section 27 of the old ordinance.

110. There should be injunctive relief to restrain the Defendants from infringing these registered trade marks of the 1st Plaintiff.

Section 63 of the new Trade Marks Ordinance

111. Section 63 is a new section enacted to give statutory rights to the proprietors of well known trade marks which are entitled to protection under the Paris Convention or TRIPS. It has to be read together with Section 4 of the Ordinance which defines the meaning of well known trade mark. Section 4(1) expressly provides that such protection could be conferred even if the owner of the mark does not carry on business in Hong Kong nor owns any goodwill in a business in Hong Kong. In determining whether a mark is well known in Hong Kong, the court should have regard to Schedule 2 to the Ordinance (see Section 4(2)). Paragraph 1 of Schedule 2 set out the relevant factors whilst Paragraph 2 set out factors not required to be established. Paragraph 2(e) provides that the trade mark needs not be well known by the public at large in Hong Kong. It only needs to be well known to at least one relevant sectors of the public (see Paragraphs 1(2)(a), (4) and (5) of Schedule 2). It is not even necessary that the mark has been used in Hong Kong (Paragraph 2(a) of Schedule 2). The relief is confined to injunction.

112. Under Paragraph 19A of the Re-re-re-Amended Statement of Claim, the Plaintiffs relied on this section in respect of "Yakult" and "養樂多". Although "益力多" was also referred to, there is no evidence suggesting the Defendants would use that in Hong Kong. The owner of the "Yakult" and "養樂多" marks is the 1st Plaintiff. Although the "養樂多" mark was registered in Taiwan by the 2nd Plaintiff, having regard to the Trade Mark Licence agreement between the 1st and 2nd Plaintiff and the registration of this mark by 1st Plaintiff at other jurisdictions, I am of the view that for the purpose of proceedings in Hong Kong under Section 63, the 1st Plaintiff should be regarded as the owner. There is no question that the 1st Plaintiff is also the owner of the mark "Yakult". Japan is a Paris Convention country and the 1st Plaintiff is an entity which has a real and effective industrial or commercial establishment in Japan. It is therefore qualified for protection under Section 4.

113. The next question is whether "Yakult" and "養樂多" are well known trade marks in Hong Kong. Although it is not expressly spelt out in Section 63, Section 4 and Schedule 2 make it quite clear that the locality at which the mark has to be well known is Hong Kong. There is no doubt that "Yakult" is well known in Hong Kong. As regards "養樂多", there cannot be any dispute that it is well known in Taiwan, but is it well known in Hong Kong? Having regard to the factors listed under Paragraph 1(2) of Schedule 2, I am of the view that it is well known in Hong Kong based on my conclusions in respect of this mark in the context of likelihood of confusion. The consumer's evidence and the survey results showed at least a substantial part of one relevant sector of the public in Hong Kong has heard of "養樂多" and they would associate it with the Plaintiffs. Further, the name has been in extensive use in Taiwan for a long period of time and there is close geographical proximity and commercial connection between Taiwan and Hong Kong. The mark has been registered in Taiwan for an equally lengthy period of time and it has also been registered in Hong Kong.

114. For reasons already given in the context of likelihood of confusion, the use of the names or marks "養樂多" and "Yakudo" by the 1st Defendant is identical or similar to these well known trade marks. The uses and intended uses are in relation to the same kind of goods and is likely to cause confusion on the part of the public.

115. Although Mr Ho did not make any submission on the basis of Section 63(2), in the light of my conclusions as to the motive of the Defendants in adopting these marks, I hold that the uses by the Defendants were not uses in good faith. The Defendants cannot escape liability under that sub-section.

116. Hence, I hold that the 1st Plaintiff is entitled to injunctive relief under Section 63.

Personal liability of the 2nd Defendant

117. In Green Cartridge v Canon Kabushiki Kaisha [1996] 2 HKC 180, the Court of Appeal considered the issue when would a director be personally liable for the tort committed by his company. The latest authority cited before the court in that case was Evans v Spritebrand [1985] FSR 267 and counsel argued the point by reference to the law as stated by Slade LJ in Evans. The disagreement between counsel, as appeared from the judgment, seems to be whether the fact that the director directed or procured the acts was sufficient (see p. 202A to B). Although all three members of the Court of Appeal held that the director in Green Cartridge should not be personally liable, the reasons given appeared to be different.

118. At p. 202 G to I, Litton VP (as he then was) considered that Nourse J's dicta in White Horse Distillers v Gregson Associates [1984] RPC 61 at 91 put the threshold too high by requiring the director to be "deliberate or reckless". Litton VP continued at p. 202I to 203A,

"... the mere fact that a director gave instructions for an act which turned out to be tortious would not, by itself, be sufficient to establish liability. There must be something more: for example, he knew that it is likely to be tortious, and nevertheless directed the infringing acts to be performed, making it his own."

Litton VP referred to giving instructions instead of directing or procuring. The concern of his Lordship appeared at p. 206D,

"If the law were that every time a managing director gives instructions (on the board's behalf) for an act which turns out to be tortious, he becomes liable personally, this would go a long way to eroding the principle of limited liability, particularly with regard to small companies."

119. Litton VP placed significance on the state of mind of the director, in particular whether the director knew that the acts were likely to be tortious or the circumstances were such that he ought to have known (see p. 207C; p. 208H). His Lordship also examined the roles played by the defendant director and the other members of the board in detail.

120. Mayo JA (as he then was) was of the view that on the facts, it could not be properly said that the defendant director procured or directed the acts complained of. His Lordship emphasized that it was a decision of the whole board and it was unlikely that the other directors allowed the defendant director to embark on a frolic of his own (p. 227H to 228H).

121. Ching JA (as he then was) found the law to be unsatisfactory. His Lordship gathered from the authorities that something more than a director voted in favour of a resolution or otherwise participated in a decision that the act should be committed was required to establish personal liability. But it was difficult to say what that something more was (p. 241I to 242B). Ching JA ended up by saying 'each case depends on its own particular facts'. His Lordship felt unable to come to any findings of fact on the materials before the court (see p. 243B) and concluded at p. 244H that as far as he could see, the defendant director did nothing more than any other director and shareholder would have done in his position.

122. Since then, there were developments in the case law in England on this topic. They culminated in the decision of the English Court of Appeal in MCA Records v Charly Records [2003] 1 BCLC 93. Chadwick LJ reviewed the authorities extensively and put forward four propositions at Paras. 49 to 52 of his judgment at p. 116-117. On the one hand, His Lordship affirmed that a director would not be personally liable if he does no more than carrying out his constitutional role in the governance of the company. On the other hand, if a director participated or involved in ways which go beyond the exercise of constitutional control, His Lordship held that he could be liable as a joint tortfeasor as in the case of other joint tortfeasors. Applying the principles laid down in CBS Songs v Amstrad [1988] AC 1013 and Unilever v Gillett [1989] RPC 583, Chadwick LJ formulated the test in Para. 52,

"an individual who does 'intend, procure and share a common design' that the infringement should take place may be liable as a joint tortfeasor."

123. That test is to be read in conjunction with the dicta of Lord Templeman in CBS Songs at p. 1058 (cited by Chadwick LJ at Para. 32),

"My Lords, I accept that a defendant who procures a breach of copyright is liable jointly and severally with the infringer for the damages suffered by the plaintiff as a result of the infringement. The Defendant is a joint infringer; he intends and procures and shares a common design that infringement shall take place. A defendant may procure an infringement by inducement, incitement or persuasion."

124. Further, the dicta of Mustill LJ in Unilever at p. 608 in respect of procuring and participation in a common design is also relevant (cited by Chadwick LJ in Para. 34 of his judgment). After saying that these should be regarded as distinct ways of infringing, Mustill LJ continued,

"... although of course a procurement may lead to a common design, and hence qualify under both heads. ... I use the words "common design" because they are readily to hand, but there are other expressions in the cases, such as "concerted action" or "agreed on common action" which will serve just as well. The words are not to be construed as if they formed part of a statute. They all convey the same idea. The idea does not, as it seems to me, call for any finding that the secondary party has explicitly mapped out a plan with the primary infringer. Their tacit agreement will be sufficient. Nor, as it seems to me, is there are need for a common design to infringe. It is enough that the parties combine to secure the doing of acts which in the event prove to be infringements."

125. In MCA Records, the relevant factual findings relating to the personal liability of the director were quoted by Chadwick LJ at Para. 21 of his judgment. The trial judge held the defendant director to be personally liable because he had impliedly directed or procured the tortious acts. The decision was upheld on appeal. There was no finding that the director knew or ought to know in the circumstances that the acts were tortious. From the last two sentences in the dicta of Mustill LJ cited above, it would seem that that was not a pre-requisite for personal liability. The highest that the English cases had regard to the knowledge of a defendant director was the following dicta of Slade LJ in Evans v Spritebrand,

"Nor ... do I dissent from that court's assumption that under English law, at least in some cases, broad considerations of policy may be material in deciding on which side of the line his participation fell. If there has been no "knowing, deliberate, wilful quality" in his participation, the court may naturally be more reluctant to hold the director personally liable."

126. I do not think Green Cartridge prevents me from following the approach of Chadwick LJ in MCA Records. Although Litton VP referred to the knowledge on the part of a director that the acts were likely to be tortious as an example of the additional element that had to be established to render him personally liable, His Lordship did not stipulate this as the only way to establish personal liability. Neither Mayo JA nor Ching JA referred to the mental element of a director as the prerequisite to personal liability. I do not read the judgment of Green Cartridge as deciding that before a director could be held to be personally liable, it has to be established that he knew or ought to have known that the acts were tortious.

127. I further note that it had been decided in Australia that there was no such prerequisite, see Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 36 IPR 225 and Microsoft Corporation v Goodview Electronics (2000) 49 IPR 578.

128. I therefore propose to examine the personal liability of the 2nd Defendant by asking whether he was so involved in the acts complained of that he became a joint tortfeasor together with the 1st Defendant.

129. Before I apply that to the facts of the present case, I need to dispose of the plea in Paragraph 13 of the Re-re-re-amended Statement of Claim that the 1st Defendant was the alter ego of the 2nd Defendant. If that were established, that could be an alternative ground for holding the 2nd Defendant to be personally liable. Chadwick LJ recognized this as exception to the general rule that if a director were to be personally liable, he was liable as a joint tortfeasor. At p. 111e of his judgment, Chadwick LJ described this scenario as where the company could be regarded as the mere tool or 'cats-paw' of the director.

130. There is no evidence to support such a plea. The fact that the 2nd Defendant was the mastermind in the 1st Defendant does not render the company to be the alter ego of the 2nd Defendant. The evidence shows that the 1st Defendant has many shareholders and there is simply no basis for this court to disregard their interests or rights in the company. The 1st Defendant also has several directors and there is no evidence to show that they were mere nominees of the 2nd Defendant. I must therefore reject the plea of alter ego.

131. The other plea in Paragraph 13 of the Re-re-re-amended Statement of Claim is that the 2nd Defendant has at all material times personally controlled, directed and procured the activities of the 1st Defendant. As explained above, the relevant activities in the present action were the use of the names and marks "養樂多" and "Yakudo" and the use of the Yakult Bottles and bottles of similar shape and design by the 1st Defendant. The names "養樂多" and "Yakudo" were chosen prior to the incorporation of the 1st Defendant since they were names by which the 1st Defendant was incorporated on 16 May 2001. There were 9 subscribers to the Articles of Association of the 1st Defendant. Amongst them, there were the 2nd Defendant, his company Dong Long Group Limited and his mother. The three of them took up 63,200,000 of the 80,000,000 subscriber shares (viz. 79%). Of all the subscribers, only the 2nd Defendant, his mother, Lee Chun Biu and Wang Tsui Hsia were introduced in the Brochure. More particularly, only the 2nd Defendant was described as the founder of the company whilst Lee Chun Biu was described as being appointed as president. Wang Tsui Hsia was introduced in the Brochure as assisting the 2nd Defendant in cultivating the Yakudo lactobacillus. The Brochure also said at its very beginning as follows,

"In May 2001, Mr Lee Tao Kuang [viz. the 2nd Defendant] established Yakudo Group Holdings Limited ..."

All these pointed to the 2nd Defendant being the mastermind in setting up the 1st Defendant under these names.

132. Prior to the incorporation of the 1st Defendant, another company under the control of the 2nd Defendant, Tao Kuang (Henyang) Industrial Development Co. Ltd (道光(衡陽)實業發展有限公司) had applied to cancel the registration of the "養樂多" mark by the 1st Plaintiff in mainland China on 26 April 2001 and applied for the registration of the mark "Yakult養樂多 & device". On 8 June 2001, Yakudo Foodstuffs (China) Co. Ltd 養樂多食品 (中國)有限公司 was formed with the 2nd Defendant as its lawful representative (法定代表人).

133. The evidence clearly shows that it had always been the 2nd Defendant's idea to use the names "養樂多" and "Yakudo" (see the discussion above as to the 2nd Defendant's explanation for the adoption of these names). Whilst I reject his explanations, his evidence put it beyond doubt that he was the person who procured the 1st Defendant to be incorporated in these names and to use the same in respect of the activities relating to lactobacillus drinks. He admitted as much in Paragraph 71 of his first affirmation. He was the one who consulted the Taiwanese lawyer about the use of the name "養樂多". He was also the person who gave an interview to the reporter of Economic Times (經濟日報) of Taiwan about the setting up of the 1st Defendant and the launch of its products under the name "養樂多" in mainland China. Although the words used by the reporter in the Article might not be his own words, it is quite plain that the 2nd Defendant was the one who gave information to the reporter with a view to promote the 1st Defendant and its business under the name "養樂多" (see Paragraph 56 of his first affirmation).

134. It is noteworthy that in my order of 3 July 2003, I ordered the Defendants to produce the minutes of the subscribers, directors and shareholders meetings of the 1st Defendant insofar as they recorded discussions concerning the selection and use of the company name and trade mark of the 1st Defendant and the bottles. I specifically mentioned in Paragraph 14 of my Decision of 3 July 2003 that these documents might be relevant to the role played by the 2nd Defendant with regard to the bottles and hence his personal liability. No document was produced pursuant to that order. The 2nd Defendant said in his 5th Affirmation that the Defendants never had such documents. If there were inputs from other subscribers, directors or shareholders in relation to these matters, one would expect the same be referred to in minutes or at least in the evidence of the 2nd Defendant. However, he did not suggest in his evidence that the idea of using the Yakult Bottle or the names "養樂多" and "Yakudo" came from someone else.

135. As regards the use of the Yakult Bottle, the registration of the design patent of that bottle in mainland China in the name of the 2nd Defendant is most telling as to his role in choosing the same. Although the burden of proof vested on the Plaintiffs, the registration of the design patent in his name meant that the companies controlled by him could only use the bottle with his permission. Mr Kosei Sakai gave evidence that the 2nd Defendant approached the 1st Plaintiff's supplier Shikokou in connection with the supply of bottles for his products (see Paragraph 148 of his Second Affidavit) and Mr Ho did not challenge this piece of evidence. The 2nd Defendant tried to explain why the Yakult Bottle and similar shaped bottle was chosen in his evidence. This shows that he was intimately involved in the process of deciding the bottles to be used for the products of the 1st Defendant. In the absence of any evidence from the defence suggesting that the use of the Yakult Bottle was the idea of somebody else, having regard to the registration of the design patent and the other evidence about the 2nd Defendant's role in running the business of his companies and in respect of the bottles and my conclusion as to the 2nd Defendant's intention to ride on the reputation of the Plaintiffs, I find on the balance of probabilities that the idea of using the Yakult Bottle originated from the 2nd Defendant.

136. I have already explained my finding as to the 2nd Defendant's motive in choosing the names and marks "養樂多" and "Yakudo" and the use of the Yakult Bottle for the lactobacillus drinks of his companies. There was simply no legitimate reasons why he should do so. The only purpose was to take advantage upon the Plaintiffs' reputation.

137. I therefore conclude that the 2nd Defendant intended and procured the 1st Defendant to commit the wrongdoing and as such he is liable as a joint tortfeasor with the 1st Defendant in accordance with the test of Chadwick LJ. As a matter of fact, the role played by the fourth defendant in MCA Records as depicted by Rimer J in Paragraph 187 of his judgment (see [2003] 1 BCLC 93 at p. 104) with regard to the relevant wrongdoing of the company appears to be less than that played by the 2nd Defendant in the present case. Of course, each case must depend on its own facts. I am however of the view that the following comments of Rimer J in respect of the fourth defendant in that case can equally be applied to the 2nd Defendant here,

"The simple fact is that he fully supported [the wrongful] activities and intended that they should continue as long as possible. He had, I find, the authority to stop them but did not. He knew that they were continuing and played his own personal part in their direct promotion."

I think I can go further than that on the facts of the present case. The 2nd Defendant virtually steered the 1st Defendant into committing these torts and as the one behind the driving wheel with every intention that the torts be committed, he must be liable as a joint tortfeasor. I would also prepare to hold that the 2nd Defendant could be described as acting in concert with the 1st Defendant in the commission of these torts bearing in mind the co-ordination between his various companies and himself in the process.

Aggravated or exemplary damages and the question of relief

138. Parties invited me to deal with the question of relief after I have handed down my judgment on the question of liability. The Plaintiffs have not made any election as to whether they would opt for inquiry of damages. In the light of that, although submissions were made as to aggravated or exemplary damages, I do not think I should decide on the issue at this stage. As I see it, the question of aggravated or exemplary damages should only become relevant if the Plaintiffs shall opt for inquiry of damages and aggravated or exemplary damages, if any, would have to be assessed by the court conducting the inquiry at the same time of the assessment of the compensatory damages. In Rookes v Barnard [1964] AC 1129 at p. 1228, Lord Devlin observed, after saying that the means of the parties and everything which aggravates or mitigates the conduct is relevant to exemplary damages but irrelevant to compensatory damages,

"But the fact that the two sorts of damage differ essentially does not necessarily mean that there should be two awards. In a case in which exemplary damages are appropriate, a jury should be directed that if, but only if, the sum which they have in mind to award as compensation (which may, of course, be a sum aggravated by the way in which the defendant has behaved to the plaintiff) is inadequate to punish him for his outrageous conduct, to mark their disapproval of such conduct and to deter him from repeating it, then it can award some larger sum."

139. I also derive some support from the judgment of Chadwick LJ in MCA Records at p. 120-121, Paras. 63 to 66, although that was said in the context of the additional damages under the Copyright, Design and Patents Act 1988. I agree that this court can give directions with regard to certain matters which emerges from evidence already heard and might be relevant to the determination of whether exemplary damages or aggravated damages should be awarded and to the assessment thereof. However, as parties have not addressed me on such directions, I do not propose to deal with that in this judgment. I shall rather leave it to the parties to raise the point at the restored hearing for the purpose of finalizing the order that this court should make in the light of this judgment.

140. Another matter which I wish to have further submissions from the parties is whether the order should be made in favour of all the Plaintiffs or just some of them. I note that Mr Liao submitted that the judgment should be in favour of all the Plaintiffs. However, the position might be different with regard to different causes of action. The case of Dawnay Day & Co. v Cantor Fitzgerald International [2000] RPC 669 may be relevant in the context of passing off but parties have not addressed me in respect of the same. I will therefore reserve the point pending further submissions from the parties at the restored hearing.

141. Therefore, I will direct the matter to be restored before me for further submissions on the question of relief in the light of this judgment. The estimated length of hearing would be one day. For the preparation of that hearing, I also direct as follows,

(a) Plaintiffs to file and serve skeleton submissions for the restored hearing at least 10 days before the hearing;

(b) Defendants to file and serve skeleton submissions for the restored hearing at least 5 days before the hearing;

(c) Draft order to be agreed, if possible. Otherwise, each side should submit their proposed order together with their skeleton submissions.

142. Lastly, I wish to thank counsel for their assistance to this court throughout the trial.