INTERGRATED DISPLAY TECHNOLOGY LIMITED v. BALLANDA LIMITED

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. This is an inter parties application for an interlocutory injunction to restrain infringement of the plaintiff's copyright in design drawings of certain temperature clocks, that is clocks that display both the time and ambient temperature. The application also sought an order to restrain the passing off of the Defendant's temperature clocks as the plaintiff's, but at the hearing, the plaintiff did not proceed with this part of its application.

2. Both the plaintiff and defendant companies are substantial manufactures of electronic quartz clocks and the like. Each claims to have itself designed its temperature clock. The clocks in question are identical save in some minor respects that are so insignificant that it is common ground that the 2 items could not have been independently designed.   A great deal of detailed evidence on affidavit has been produced and analysed in the hearing that has taken more than 3 days.

3. It is, however, clear from the now well known case of American Cyanamid v. Ethicon (1975) AC 396, to which counsel for both parties referred, that I do not have to embark upon anything like a preliminary trial of the action or even consider whether the plaintiff has made out a prima facie case.  What I have to do to start with is to satisfy myself that there is a serious question to be tried. Lord Diplock at page 407 and 408 of that report said -

"The use of such expressions as 'a probability', 'a prima facie case', or 'a strong prima facie case' in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried.

It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations.  These are matters to be dealt with at the trial. One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that 'it aided the court in doing that which was its great object, viz. abstaining from expressing any opinion upon the merits of the case until the hearing Wakefield v. Duke of Buccleugh (1865) 12 L.T. 628, 629. So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.

4. Having regard to all the material before me, I am satisfied that there is a serious question to be tried; indeed that is so plain that I will waste no more time upon this initial step. I will only repeat that it is no part of my function at this stage to resolve conflicts of evidence, upon which so much time has been spent. Since the material before me, again plainly, does not fail to disclose that the plaintiff does have a real prospect of succeeding in his claim for a permanent injunction, I will proceed forthwith to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief sought.

5. As to that, under Lord Diplock's judgment referred to, the governing principle is that I should first consider whether, if the plaintiff were to succeed at the trial in establishing its right to a permanent injunction it would be adequately compensated by an award of damages for the loss it would have sustained as a result of the defendant continuing to do what is sought to be restrained between the time of application and the time of trial.

6. The evidence before me shows that the plaintiff has devoted significant resources to the designing, production, promotion, advertising, and sale of its TT238 clock. It has also made substantial sales and expects these to increase as its promotion and advertising efforts begin to have their full effect. The plaintiff is a reasonably large manufacturing company with annual sales valued at almost $100 million. About 9% of its manpower and manufacturing resources are devoted to the TT238, which is virtually the only temperature clock it manufactures, only one other model having been mentioned. Already its exclusive agent in Japan has complained to the plaintiff that it is permitting the defendant to market its TT238 in Japan as model TC50. A west German customer has claimed that the defendant is selling the same model at a lower prices, asking how that was possible as it thought it had received a good price. A Canadian customer has complained and asked if it is fair that a Hong Kong agency should be offering identical clocks as TC50 models at lower prices implying that the plaintiff is the actual manufacturer. The damage and potential damage to the plaintiff's reputation and goodwill is obvious, and would not be easily quantifiable. I consider therefore that the plaintiff would not be adequately compensated by an award of damages in respect of such loss or damage. In case I am wrong in this conclusion I will proceed to consider whether the defendant would be in a position to pay damages (assuming that damages would have adequately compensated the loss).

7. The defendant's accounts show that it too is a relatively large manufacturing company with annual sales of the order of $50 million about half that of the plaintiff's. But they do not disclose a healthy picture, nor anything as healthy as the plaintiff's financial position, in particular the latter's large cash deposits. What is more to the point is the defendant's relatively small profit for 1983/84 and the substantial loss of $1.82 million in 1984/85; the drawing down of very nearly the entire banking facilities of $9.5 million made available upon inter alia, a debenture over its entire assets; and finally the auditors' disquieting reservation that

"in view of the accumulated losses as at 31st March 1985 continuance in business as a going concern is dependent upon the retention of financial support of the groups bankers and attaining future profitable operations".

notwithstanding Mr. Lewis' submission that it is not unusual or abnormal for manufacturers in Hong Kong to operate on credit financing in the particular cirumstances disclosed I doubt I should be satisfied that the defendant would be in a financial position to pay damages.  So that even if damages would be an adequate remedy for the plaintiff, the plaintiff would not, in the normal way, be denied an interlocutory injunction for that reason.

8. Since I have found that damages would not be an adequate remedy for the plaintiff, under the American Cyanamid guidelines I have now to consider whether, if the defendant were to succeed at the trial, the defendant would be adequately compensated under an undertaking of the plaintiff as to damages for the less that would be sustained by the defendant being restrained, and if so whether the plaintiff would be in a financial position to pay them.

9. The evidence shows that the defendant has not attached the same sort of importance nor devoted the same scale or amount of resources to the production, manufacture, promotion and sale of its model TC50. It has quite a number of different temperature clock models and the cessation of work on just one should not be significantly disruptive.  It is the plaintiff who clearly is already in full production and sale; comparatively the defendant presents a picture of only producing and selling its model TC50 on a very small scale indeed. In addition, it has not produced any evidence of damage to reputation or of complaints of the sort adduced by the plaintiff. The evidence indicates that it would suffer little if any loss that could not be compensated by damages. Indeed the alacrity with which its director concerned caused an assurance to be given by its solicitors that it would temporarily refrain from assembling and shipping its model TC50, is a powerful indication that temporary cessation of manufacture and sale i.e. the substance of the interlocutory relief sought, would not cause undue loss.

10. I imagine that some minor loss of reputation cannot be ruled out, but as Lord Diplock pointed out in his judgment at pages 408 and 409 of the report -

11. It will be apparent from what I have already said that in my view, the extent to which the plaintiff would be incapable of being compensated in damages in the event of its succeeding at the trial is incomparably greater than the extent to which the defendant would similarly be incapable of being compensated.

12. In the result, I have no hesitation whatever in concluding that the balance of convenience is clearly and very substantially in favour of granting the injunction, to which the plaintiff is accordingly entitled.

13. I will hear counsel on the terms of the order.