Great Power Electronic Products Co. v. Carsan Industries Ltd. and Others

CACV 83/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 83 OF 1999

(ON APPEAL FROM HIGH COURT ACTION NO. 7333 OF 1998)

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J U D G M E N T

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Rogers, J.A. :

1. This is an appeal in an Order 14 application from a judgment of Yeung, J. given on 4th March this year. The action is in respect of toy cars. The Plaintiff is a manufacturer of remote control toy cars. They are not particularly expensive but nevertheless quite attractive. The Plaintiff has a substantial turnover. One of the cars which was made since about 1990 had been its model "GP 841", that is a model of a "F40" Ferrari car. "GP" stands for "Great Power".

2. The claim is brought both in copyright and in passing-off. It is brought against 3 Defendants. The 1st and 2nd Defendants are companies and the 3rd Defendant is a director of both companies.

3. Turning to the copyright claim first, the statement of claim claims copyright in 4 labels, the "Ferodo 8", "F40 Turbo", "Racing Team" and "GP Racing Team MLC". The statement of claim also claims that the Plaintiff is the proprietor of the copyright subsisting in the original design and artworks in respect of "the said model and the said labels".

4. The particulars of subsistence of copyright are rather sparse. Instead of the usual statements as to precisely what drawings copyright is claimed in, who made them, when they were made, when they were first published and when any assignments were taken, what is said is that "in early 1990 the Plaintiff commissioned one local design company called Foreart Graphic Space to design the said model and the said labels in return for design fees paid by the Plaintiff."

5. This claim is therefore one in respect of what I would call "pre-June 1997 copyright". The provisions of the body of the Copyright Ordinance, therefore do not apply but the transitional provisions in Schedule II of the Copyright Ordinance apply. In respect of that therefore, specifically section 15 of the Ordinance, which deals with commissioned works, does not apply but the pre-existing law applies.

6. In those circumstances, having seen the only existing document which was the invoice for the payment of the money in respect of commission, the best that the Plaintiff could rely on is that it is the equitable owner of the copyright; the legal owner would be the graphic artist or Foreart Graphic Space for which he worked. But the equitable title of the copyright would, of course, be the Plaintiff's. There would be no difficulty in the Plaintiff applying for an interlocutory injunction on the basis that it is an equitable owner of the copyright but as referred to in the 13th edition of the Copinger and Skone James on Copyright at paragraph 4-67, in footnote 67 the legal owner must be joined before the action proceeds to trial. The case cited there is the well-known case of the Performing Right Society Ltd. v. London Theatre of Varieties Ltd. [1924] A.C. 1; also reference is made to the decision of Graham, J. in the Merchant Adventurers Ltd. v. M. Grew & Co. Ltd. [1972] Ch. 242.

7. That being the case, on the Plaintiff's own case, unfortunately the Plaintiff would only be the equitable owner of the copyright and it would not be entitled to final judgment unless either it joined the designer as a Co-plaintiff or as a Defendant to the action.

8. There are certain another difficulties with regard to this claim because whereas Order 14 rule 2(1) provides that an application under Order 14 must be made by summons supported by an affidavit verifying the facts on which the claim or part of a claim to which the application relates is based, unfortunately, the affidavit, possibly because it was drafted with a view to an application for an interlocutory injunction, does not verify the facts in the statement of claim. What it seeks to do is to set out the basis of the Plaintiff's claim in a narrative form.

9. Here, unfortunately, comes another difficulty. In paragraph 10, three of the labels are referred to in respect of which copyright is said to reside and these are said to be exhibited in exhibit YCM-5. When YCM-5 is considered, a series of different labels have been exhibited. Unfortunate though it is, it seems to me that the Plaintiff has not got its case on copyright in order and is not entitled to final judgment, at the moment, on copyright.

10. Turning to the case on passing-off, the case is somewhat different. The Plaintiff is of course called "Great Power Electronic Products Co.". It seems to me that it would take very little evidence to establish that a firm using its own name has established some sort of reputation sufficient to launch a passing-off action. Here, the Plaintiff claims to specialise in small model cars, particularly those which are radio-controlled. Over the years, it has had a substantial turnover which has increased from $25.3 m in 1994 to $39.6 m in 1997. In those circumstances, I would regard it as almost a foregone conclusion that it has a sufficient reputation in its own name to file an action for passing-off in appropriate circumstances.

11. In this case, the Plaintiff has established that it has made substantial sales of its "GP 841" car. The importance of that car to the Plaintiff has dropped over the years. In 1991, when presumably the car was introduced, it represented 22% of its turnover. By 1997, that had gradually dropped to 9%. Still no doubt, the turnover is significant. The Plaintiff has exhibited a sample of its model car and underneath it has its name "Great Power" with the initials "GP".

12. The real contest in this case is as to whether the Defendants have dealt with model cars which are not the Plaintiff's. It has been said that the evidence against the Defendants was that inquiries were made of the 2nd Defendant and the 3rd Defendant, being a director, was the person who was spoken to. She said that she did not have very much to do with the day-to-day workings of the 1st Defendant but put the investigator onto the 1st Defendant and made contact by telephone and passed the telephone over to the investigator. The first round of inquiries by the investigator produced nothing. The second round of inquiries by the investigators also produced nothing.

13. The Plaintiff thus falls back on a sample car which was said to have been obtained by a customer and was thereafter given to the Plaintiff. The sample car is almost indistinguishable from the Plaintiff's. Having looked at the sample which admittedly has not been exhibited but, no doubt, could be exhibited to an affidavit if that were required, it is almost identical but it clearly, it seems to me, comes from different moulds than the Plaintiff's. There are tell-tale differences in the cars.

14. The customer said that that car came from a Mr. Yuen who was an employee of the 1st Defendant who had given it to him.

15. What Mr. Yuen, who is the employee of the 1st Defendant has said about it is related in an affidavit made by Mr. Lee who is also a director of the 1st Defendant. He says that he has spoken to Mr. Yuen, who has become the sales manager of the 1st Defendant since 1st June 1997 but that Mr. Yuen could not remember whether such things as alleged took place as he met so many clients each day. However, according to Mr. Yuen, if there were any samples of the "GP842" (which I understand to be a mistake of "GP841" model) provided to any customers, the samples must have been the Plaintiff's own product being goods left over by the 2nd Defendant from its previous orders placed by the Plaintiff.

16. In my view, the Judge below rightly rejected the suggestion that the sample which has been produced could have come from the Plaintiff. Clearly, in my view, it did not. However, the sample which has been produced has the name "Great Power" underneath in the same position as the Plaintiff's model but it also has a logo underneath where the Plaintiff puts the initials "GP".

17. There is not a sufficient denial of the supply of this car by the 1st Defendant. If Mr. Yuen were to deny that that car came from him, he should have said so in specific terms and at least Mr. Lee should have said so. But a mere statement that he cannot remember what took place is, in my view, insufficient. It beheld Mr. Yuen to examine the sample which was said to have come from him and to demand sight of that if a proper denial were to be made.

18. In these circumstances, it seems to me, the Judge below rightly accepted that that model came from the 1st Defendant and, in my view, it follows quite clearly that a passing-off action would lie.

19. If anybody were to sell a car so similar to the Plaintiff's model car which had been a substantial part of its production and put the distinctive part of the Plaintiff's name on it, the allegation of passing-off, in my view, is inescapable.

20. However, the evidence against the 2nd Defendant is, in my view, too nebulous to merit an Order 14 application and the matter in respect of them should go to trial. What is said against the 2nd Defendant is that they are the exporting arm whereas Carsan, the 1st Defendant, is merely the domestic sales arm. Simply because the 2nd Defendant is the exporting arm, does not go sufficiently, in my view, to show that the 2nd Defendant has exported this model.

21. A further difficulty in this case is that it is accepted and indeed has been shown by copies of the invoices, that in the past the 2nd Defendant had sold supplies of the "GP841" from the Plaintiff to its own customers. Therefore, the 2nd Defendant could legitimately display the "GP841" in its catalogue. The question is simply whether in doing so it was selling the Plaintiff's model or anybody else's. As regards the 3rd Defendant, again, although the 3rd Defendant is, to a certain extent, involved because clearly she put the investigator onto the 1st Defendant, her complicity in the acts of passing off, in my view, is not sufficiently shown to warrant an Order 14 judgment against her.

22. In my view, the right order in these circumstances would be that final judgment should be given against the 1st Defendant in respect of passing-off by use of the name or words "Great Power" and the injunction should be limited to that at this juncture. Whether or not the Plaintiff can succeed in its claim to reputation in respect of "GP" is, in my view, something which should go to trial, particularly in view of the fact that not only are initials very difficult to protect but also the initials "GP" in relation to cars and motor racing clearly have other connotations.

23. In respect of all other matters, I consider the matter should go to trial and leave to defend should be given. I would therefore allow the appeal to that extent accordingly.

Mortimer V-P:

I agree. There is nothing I can usefully add. In these circumstances the appeal will be allowed in part. All defendants will have leave to defend the copyright action. The 2nd and 3rd defendants will have leave to defend the passing-off action. We dismiss the appeal of the 1st defendant in the passing-off concerning the words "great power". Those orders must be drawn up accordingly.

So far as the costs are concerned, this presents the difficulty we have mentioned. What we seek to do is to make a just order but not to make such a complicated order that the focus of all the parties will be diverted from the real action and more costs will be spent trying to resolve costs issues. We think this is a practical and just order: So far as the plaintiff and the 1st defendant are concerned, they each won part and lost part of the appeal. So there will be no order for costs of the 1st defendant or the plaintiff on the appeal. The 2nd and 3rd defendants shall have their costs of their appeal. The costs below will remain the costs in the cause.