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

IN THE COURT OF APPEAL

1996, No. 11
(Civil)

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J U D G M E N T

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Nazareth, V.-P.:

1. This is an appeal against the order of Findlay, J. refusing the appellant/defendant ("CG") a stay of the action brought by the respondent/plaintiff ("Lacoste").

2. Having regard to the firm conclusion I have reached in this matter, I do not find it necessary nor, indeed, appropriate to refer in any great detail to my reasons and the relevant circumstances.

3. The action arose out of a Settlement Agreement dated 1st May 1980 ("the Settlement Agreement") entered into by the parties to these proceedings, who are well-known manufacturers of clothing. By the Settlement Agreement they settled differences arising from litigation in Hong Kong and the United Kingdom. The dispute was as to their use of their respective emblems which formed part of their trademarks for their goods. Lacoste's emblem is a crocodile facing right, and CG's emblem is a crocodile facing left.

4. The Settlement Agreement contains as clause 6(5) the following:

"Relation between the Parties outside Hong Kong

CG shall not apply for registration nor cause, enable or assist any third party to apply for registration of the Emblem Mark or any trademark confusingly similar with the Emblem Mark in any part of the world outside of Hong Kong save and except assistance rendered to [Lacoste] at their prior request in writing, such prohibition applying to each and every kind of goods in any class."

5. It is common ground that "the Emblem Mark" means Lacoste's emblem of a crocodile looking right; and indeed this is the effect of clause 3.

6. Some time after the Settlement Agreement was entered into, CG applied to the Trade Mark Office in the People's Republic of China ("TMO") for the registration of certain trademarks embodying its own crocodile emblem. Lacoste regarded the trademarks as confusingly similar to its emblem and took steps in the TMO to oppose the registration. Thereafter, Lacoste also commenced the present action in Hong Kong for breach of contract, seeking inter alia orders to require CG to withdraw its application in the TMO, and to restrain CG from applying for registration outside Hong Kong of trademarks confusingly similar to its emblem. CG responded with the application for stay of the action, which was dismissed by Findlay, J.

7. Subsequent to that and to CG filing the present appeal to this Court, the TMO, having considered four of the six CG oppositions, held against Lacoste and ordered that they be registered. Evidence of these, and of the TMO rulings, has with leave been adduced before us.

8. The main ground relied upon by Mr John Scott QC for CG, below and before us, was that of forum non conveniens. It is not in dispute that the relevant test is that propounded by Lord Goff in Spiliada Maritime Corporation v. Cansulex Ltd. [1987]1 AC 460; 476C:

"... a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice."

9. Stripped to its essentials, Mr Scott's submission began with clause 6(5) of the Settlement Agreement. He submitted that having regard to the factual matrix and object of the Agreement "confusingly similar" can only be construed by reference to the population of the jurisdiction concerned; and that upon that basis the TMO must be the appropriate forum for the trial of the action in terms of the Spiliada test. It is common ground that the TMO is the tribunal concerned in the People's Republic of China. But needless to say, the construction contended for is strongly contested by Mr Geoffrey Ma QC who, with Mr John Yan, appeared for Lacoste. He submits, putting it no higher than the onus upon him in resisting the application, that it is plainly at least arguable that the question of what is confusingly similar is not, and could not have been, left to the vagaries of each individual jurisdiction, but was indeed to prevent that very situation which would be impossible for Lacoste; and that clause 6(5) properly construed required the question to be answered in Hong Kong, by the courts of Hong Kong, applying Hong Kong as the proper law under the express choice of law provision comprising clause 6(10) of the Settlement Agreement.

10. In addressing those submissions, it is helpful to examine the nature of the Settlement Agreement. It is plainly what Mr Ma described as a "carve-up" of the market and the use of the emblems and trademarks. Lacoste gave up ownership of emblem within Hong Kong and CG agreed not to apply outside Hong Kong for registration of trademarks confusingly similar to Lacoste's emblem. It is plainly arguable that it would be absurd that in the context of such an agreement, Lacoste could have intended that CG would be able to apply for registration in any country in the world with a real prospect of success presented by the uncertainties and vagaries of local circumstances; and even more so, with virtually certain prospects of success in countries to which Lacoste had not yet extended its operations. Having reached this point, I have no difficulty in concluding that CG failed to show that the TMO, the only other forum contended for, is a forum which is the appropriate forum for trial of the action in which the case may be tried most suitably for the interest of all the parties and the ends of justice, a fortiori given that the proper law of the agreement and, also its language, are respectively the law applied by the courts and a language used by the courts of Hong Kong.

11. There are other considerations that go to the same conclusion, including whether the issues in the Hong Kong action and before the TMO are similar. I do not find it necessary to adumbrate these, although some will be apparent from the remainder of this judgment.

12. It follows that CG's plea of forum non conveniens must fail. However, Mr Scott relied also upon other grounds, and those it is only necessary to touch upon briefly. The second ground of appeal upon which he relied was lis alibi pendens. He submitted that at heart the same question arose in the Hong Kong action as in the TMO oppositions, i.e. that of confusing similarity. However, I am not able to accept that submission. It is true that CG's expert in Chinese law claimed that the TMO would base its decisions on the matter of confusing similarity. However, this was disputed by Lacoste's expert who claimed that the tribunal would look also to other matters including the Settlement Agreement and to any unfair means by which preliminary approval of the trademarks was acquired.

13. The issue in the Hong Kong action is primarily whether CG is in breach of the Settlement Agreement in applying for registration of the trademarks concerned. This issue will have to be addressed in the context of that Agreement, its matrix and purposes. The range of relief sought by Lacoste will in addition involve considerations that will not arise before the TMO.

14. Although, therefore, there is some overlap, the issues and their nature in the two proceedings are so significantly different that I reject CG's contention that they are similar or sufficiently similar to sustain its plea of lis alibi pendens.

15. The judge was clearly right when he said at page 7 of his judgment that:

"What the [TMO] will decide is whether the registration marks should be registered, and it will decide that question by the application of PRC trademark law and practice.

What this court will decide is whether the defendant is entitled to seek registration of registration marks in the light of the meaning of the agreements, construed according to the surrounding circumstances and according to the law of Hong Kong.

These questions, in my view, are different. There is some similarity between them, but they are far from identical. The two tribunals will proceed to determine the question of similarity against the background of a different factual and legal matrix."

16. Plainly, therefore, the proceedings in the two tribunals cannot be said to be "about the same matter" nor will the "same facts ... be in issue" (per Lord Diplock in The Abidin Daver [1984] 1 AC 398; 411A-412A); nor will the proceedings present the "duplication" referred to in Slough Estates Ltd. v. Slough Borough Council [1968]1 Ch299; 313G; or to be actions or proceedings for the same matter or object (see The Supreme Court Practice 1997 Vol. 2 para. 5221, 5237) in the way questions of lis alibi pendens (and forum non conveniens) were dealt with there.

17. Moreover, it was of course CG that applied to the TMO for registration of the trademarks. But the CG contends that Lacoste created a lis alibi pendens situation by lodging oppositions. This is upon the basis that procedurally the TMO first "preliminarily" approves and publishes a trademark that conforms to the relevant regulations under the Trademark Law; and that it is only then that oppositions may be lodged. That seems to me to be a wholly unrealistic view of the matter which I have no hesitation in rejecting.

18. CG's plea of lis alibi pendens therefore fails.

19. All that remains of CG's grounds of appeal are some claimed misdirections of a minor sort which it is submitted vitiated the exercise of the judge's discretion. As to those, I do not accept, as contended on CG's behalf, that the judge failed to recognise the manifest similarities between the issues for consideration by the TMO and those arising in the Hong Kong action. Likewise, given the different nature of the two proceedings, it does not seem to me that the judge was wrong in taking into account the possibility that Lacoste might seek to pursue an injunctive remedy even if the TMO disallowed CG's applications for the trademarks, which was a peripheral matter in any event. I have to say in conclusion that even if the judge had misdirected himself in the minor respects mentioned, I cannot see that this Court could properly exercise the discretion it would thereby acquire in any different way.

20. For the reasons I have sought merely to outline, I would dismiss the appeal and make an order nisi that Lacoste is to have its costs of the appeal to be taxed if not agreed.

Godfrey, J.A. :

21. I agree.

22. The plaintiff ("Lacoste") obtained, as part of the agreement it made with the defendant ("Crocodile") on 1 May 1980, a promise on the part of Crocodile that Crocodile would not apply, in any part of the world outside Hong Kong, for registration of any trade mark "confusingly similar with" what was called in the agreement "the Emblem Mark" (an emblem representing a right-facing crocodile reproduced in Schedule 2 to the agreement).

23. Crocodile applied to the Trade Mark Office of the State Administration for Industry and Commerce of the People's Republic of China ("the PRC TM Office") for registration of a number of trade marks.

24. Lacoste asserted but Crocodile denied that these marks or some of them were "confusingly similar with" the emblem mark. Lacoste accordingly opposed Crocodile's applications, and instituted proceedings in Hong Kong to compel Crocodile to withdraw its applications. But Crocodile sought a stay of those proceedings, pending the determination of Lacoste's objection to its applications, or of any appeal or appeals therefrom. It claimed that the question was whether the one mark was confusingly similar to the other in China; and that that question would, clearly, be more conveniently decided there.

25. The judge below disagreed. He refused to stay Lacoste's proceedings. Since then, the PRC TM Office has approved registration of a number of the marks for which Crocodile applied. It held as follows (I quote from the English translation supplied to us):

"The 'CROCODILE TWIN' trademark for which [Crocodile] applied and the 'Lacoste and Device' trademark for which [Lacoste] had obtained prior international registration are different in terms of text, meaning and pronunciation and cannot cause confusion. The objects indicated by and the design concepts of the drawing of the two trademarks are different, the directions in which the shapes in the two trade marks face is different and there are marked distinctions between the trademarks as a whole."

26. It is now said for Crocodile that the judge's view, which was that the PRC TM Office ruling would not be determinative of the Hong Kong action, was wrong. On the contrary, says Crocodile, the factual issue in both jurisdictions is the same and can be answered only by reference to that which confuses the public in China. I would agree that the PRC TM Office is better able to assess what is likely to cause confusion in China than is the Hong Kong court, and that there is some overlap between the question which has to be decided in the PRC under Article 17 of the Trade Mark Law, i.e. whether the trade mark of which registration is sought is "identical with or similar to the trade mark of another person ....." and the question which Lacoste has asked the court to consider here, i.e. whether the trade marks sought to be registered by Crocodile in the PRC TM Office are, or any of them is, "confusingly similar with" the right-facing crocodile emblem reproduced in Schedule 2 of the agreement of 1 May 1980. But the questions are not the same. Further, I am of the opinion that, on the true construction of clause 6(5) of that agreement (which Nazareth V.P. has set out in his judgment), the parties must be taken to have intended the question of confusing similarity to be decided objectively by the Hong Kong court. They cannot, in my opinion, be taken as having intended that, so far from being able to rely in Hong Kong on clause 6(5) in the event of an attempt on the part of Crocodile to register an (allegedly) "confusingly similar" trade mark outside Hong Kong, Lacoste would have to wait and take its chances on obtaining in opposed proceedings a decision on its favour from the trade mark office in any and every country in which Crocodile chose to apply for registration of such a trade mark.

27. The judge refused to accept that it was "clearly and distinctly more appropriate" to leave the question which arises in the Hong Kong action to be determined by the PRC TM Office or by a tribunal of appeal from it. I think the judge was quite right. He exercised his discretion so as to refuse Crocodile's application for a stay of Lacoste's Hong Kong action. I would not interfere with his decision. I would echo what Simonds J. said in Ravenhead Brick Co. Ltd. v. Ruabon Brick & Terra Cotta Co. Ltd. (1937) 54 PRC 341 at p.348 :

"In my view, a defendant has no right to divert the plaintiff from the court which he has chosen and is entitled to choose for the vindication of his rights and take him to the Patent Office ....."

Still less, I would add, someone else's Patent Office.

28. Like Nazareth, V.P., I would dismiss this appeal.

P. Chan, J.:

29. I agree. For the reasons give by my Lords, I too would dismiss the appeal.