CYBEX GmbH v. SYTO CONSULTANTS AND INVESTMENT LTD

HCMP 75/2020

[2022] HKCFI 972

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 75 OF 2020

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HCMP 172/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 172 OF 2020

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	IN THE MATTER OF The Trade Marks Ordinance (Cap. 559)
	AND IN THE MATTER OF an Application by Cybex GmbH for a Declaration of Invalidity in respect of Hong Kong Trade Mark Registration No. 301949473 “” in Classes 12, 18 & 25 in the name of Syto Consultants and Investment Limited (“the Respondent”)
	AND IN THE MATTER OF an Appeal against the Decision of the Registrar of Trade Marks refusing the said Application

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JUDGMENT

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1.  There are two matters before me:

(i)   under HCMP 75/2020, an application (“the Non-use Application”) brought by Cybex GmbH (“Cybex”) for revocation of the device mark “ ” No 301949473 (“the Suit Mark”) registered in the name of Charmie Investments Limited (“Charmie”) as of 17 June 2011 and assigned to Syto Consultants and Investment Limited (“Syto”) on 11 April 2016 pursuant to s 2(2)(a) of the Trade Marks Ordinance, 559 (“TMO”) for non-use; and

(ii)  under HCMP 172/2020, an appeal (“the Appeal”) brought by Cybex against the decision of the Registrar of Trade Marks (“the Registrar”) dated 14 January 2020 regarding the invalidation of the Suit Mark pursuant to s 53 of the TMO.

2.  Though there is no order for both proceedings to be heard together, they were fixed for hearing on two consecutive days.  Since both proceedings are related, I have indicated to the parties that I would hand down one Judgment for both cases.

BACKGROUND

3.  Cybex is a German company founded in 2003 which designs, develops, manufactures, markets and sells strollers, children’s car safety seats, baby carriers and other products for young children under the “CYBEX” brand.  Cybex first registered the “CYBEX” mark in 2004 in the European Union (“EU”) for goods in classes 12 and 20 and subsequently extended to goods in many classes and in many countries throughout the world.

4.  The circular device in the Suit Mark (“the Circular Device”) was designed in or about 2008 and Cybex has used such device in relation to its goods since 2008.  Cybex has registered the Suit Mark in many countries including the EU and the United States.

5.  Charmie, the previous registered proprietor of the Suit Mark, belongs to a group of companies (“the Dickinson Group”) comprising, inter alia, Dickinson NSFL Co. Ltd (“Dickinson NSFL”), Dickinson Garment Group Ltd, Dickinson Company Limited and Charmie.   Charmie is an offshore corporate vehicle incorporated for the purpose of holding the intellectual property rights used by the Dickinson Group in the course of its business.

6.  On 1 November 2010, Dickinson NSFL and an associated company of Cybex (Cybex Industrial Ltd) entered into an exclusive distribution agreement where the former was appointed the exclusive distributor of children car seats, strollers, baby carriers and other related products designed, developed and manufactured by Cybex’s associated company in the Mainland, Hong Kong and Macau (“the 1^st Distribution Agreement”).  Under this agreement, the distributor was granted the right to use the trade marks of Cybex which included the CYBEX word mark and the Suit Mark^[1].

7.  Charmie made a successful trade mark application in respect of the Suit Mark on 17 June 2011 (“the Subject Application”).

8.  The Suit Mark is and was registered in Classes 12, 18 and 25 in respect of the following specified goods:

(i)    Class 12: Apparatus for locomotion by land, air or water; vehicles, in particular, bicycles, tricycles (included in this class); pushchairs (included in this class), accessories for the aforesaid vehicles, namely seats for children, carrier bags, shopping baskets, respectively out of plastic or textile materials; safety seats for children for automobiles and parts thereof, such as cushions, safety belts for automobile seats; rain protection covers for pushchairs.

(ii)   Class 18: Leather and leather imitations and goods made of these materials and not included in other classes; trunks and travelling bags; umbrellas; parasols and walking sticks; whips, harnesses and saddlery (included in this class); bags (included in this class); purses (included in this class); wallets, backpacks, school bags; bags for carrying children, in the form of a backpack; child carrier frames and baby carriers, included in this class; baby accessory bags, included in this class; parasols for pushchairs.

(iii)  Class 25: Clothing and shoes, in particular, sportswear articles and sports shoes, as well as children's clothing and children's shoes; bibs, not made of paper.

9.  The 1^st Distribution Agreement was terminated by mutual agreement on 7 February 2013.  In its place, a new distribution agreement was entered into between Cybex and Dickinson NSFL on 25 February 2013 (“the 2^nd Distribution Agreement”).    In Recital (B) of the said agreement, Dickinson NSFL acknowledged that Cybex is the owner of all intellectual property rights subsisting in Cybex’s products which includes all trade mark rights, registered or unregistered.  Further, under the 2^nd Distribution Agreement, the distributor was only permitted to sell children car seats, strollers and baby carriers, unlike the 1^st Distribution Agreement when there was no such limitation^[2].

10.  Clause 6.2 of the 2^nd Distribution Agreement provides several scenarios for termination, one of which was by giving 3 months’ notice.  The effects of termination were governed by Clause 6.3 and include the immediate cessation of business activities under the agreement by the distributor unless the termination was by mutual consent, in which case, the distributor may sell unsold goods for a limited period of time upon permission in writing by Cybex^[3].

11.  The 2^nd Distribution Agreement was terminated by Cybex on 13 December 2013 pursuant to clause 6.2.2, i.e. by giving 3 months’ notice.  Thus, pursuant clause 6.3.1, Dickinson NSFL had to cease all dealings in CYBEX products under the said agreement on 12 March 2014.

12.  On 26 March 2015, Cybex applied for registration in Hong Kong of a mark containing the Circular Device the same as the Subject Mark.

13.  In September 2015, Cybex appointed Infosky Global Development Ltd to market and sell CYBEX products bearing the Suit Mark in Hong Kong.

14.  On 14 March 2016, Cybex raised a complaint that the Subject Application was made by Charmie in bad faith and requested Charmie to assign the registration of the Suit Mark back to Cybex.  Charmie refused.

15.  On 8 April 2016, Charmie transferred the ownership of the Suit Mark to Syto and appointed Syto to hold the same as agent of Charmie.

16.  On 5 July 2016, Cybex made an application to the Registrar for a declaration of invalidity of the registration of the Suit Mark (“the Invalidation Application”).  On 14 January 2020, Ms Connie Law for the Registrar (“the Hearing Officer”) refused the Invalidation Application.  Cybex lodged the Appeal against the decision of the Hearing Officer (“the Decision”) under HCMP 172/2020.

17.  On 16 January 2020, Cybex issued the originating summons in HCMP 75/2020 for the Non-use Application.

THE NON-USE APPLICATION

18.  I first deal with the Non-use Application which is one made under s 52(2)(a) of the TMO.

19.  The relevant part of s 52 reads as follows:

“(2) The registration of a trade mark may be revoked on any of the following grounds, namely—

(a) that the trade mark has not been genuinely used in Hong Kong by the owner or with his consent, in relation to the goods or services for which it is registered, for a continuous period of at least 3 years, and there are no valid reasons for non-use (such as import restrictions on, or other governmental requirements for, goods or services protected by the trade mark);

… … …

(6) Where grounds for revocation exist in respect of only some of the goods or services for which the trade mark is registered, revocation shall relate to those goods or services only.

(7) Where the registration of a trade mark is revoked to any extent, the rights of the owner shall be deemed to have ceased to that extent as from—

(a)the date of the application for revocation; or

(b)if the Registrar or the court is satisfied that the grounds for revocation existed at an earlier date, that earlier date.

(8) For the purposes of subsection (2)(a), the 3-year period may begin at any time on or after the actual date on which particulars of the trade mark were entered in the register under section 47(1) (registration).”

20.  The originating summons for the Non-use Application was issued on 16 January 2020 and thus the period of non-use that one focuses on is between 17 January 2017 and 16 January 2020.   However, the court is empowered to declare an earlier date of revocation than 16 January 2020 if there are grounds to do so pursuant to s 52(7) of the TMO.

21.  Cybex relies on the following 3 broad grounds in support of the Non-use Application:

(i)    There is no evidence of genuine use for at least 3 years prior to 16 January 2020, i.e. between 17 January 2017 and 16 January 2020.

(ii)   There is no evidence of consent from Syto for use of the Suit Mark from 11 April 2016, i.e. the date of assignment of the Suit Mark from Charmie to Syto.

(iii)  Based on the principle of ex turpi causa, Syto and Charmie cannot rely on any use after the termination of the 2^nd Distribution Agreement as “genuine” use as any such use contravenes Clause 6.3.1 of such agreement.

22.  For our present purpose, I will focus mainly on the first ground.

(a)     Legal principles for non-use

23.  The principles of what is genuine use are well settled.  In summary, the principles are^[4]:

(i)    There must be actual use of the mark.

(ii)   Token use of the mark is not genuine.

(iii)  In order to be genuine, use must be consistent with the essential function of a trade mark, namely to guarantee the identity of the origin of the goods or services to the consumer or end user.

(iv)  Genuine use involves use of the mark in relation to goods or services already marketed or about to be marketed and not just internal use by the relevant undertaking.  Such use may be by the trade mark owner or by a third party with authority to use the mark.

(v)   Commercial exploitation of the mark must be real, having regard to all relevant circumstances.

(vi)  The circumstances of a case may involve consideration of the nature of the goods or services, the characteristics of the market and the scale and frequency of use of the mark.

(vii) Use need not always be quantitatively significant to be genuine.

24.  One of the factors in considering the issue of genuine use is whether there is real commercial exploitation of the mark in Hong Kong, or use to create or preserve a market share in Hong Kong.^[5]  This factor may be of particular relevance in the present case, as the evidence suggests that the Dickinson Group was only disposing of the left-over stock of the CYBEX products after the termination of the 2^nd Distribution Agreement.

25.  Insofar as what is token use or small scale use is concerned, each case must be judged on its own facts.  It has been held that use of a mark on a coat hanger in up to 12 stores over 5 years was insufficient.  Whereas use of a mark evidenced by 12 invoices over 26 months was sufficient.^[6]

26.  The evidential burden of proving genuine use lies on the registered trade mark owner.  Genuine use of a trade mark cannot be proved by means of probabilities or suppositions, but must be demonstrated by solid and objective evidence of actual and sufficient use of the trade mark on the market concerned.^[7]

(b)     The evidence from the parties

27.  According to Cybex, its investigators visited 15 retail shops on 30 January 2020.  Two shops, “Mothercare” and “0/3 BABY”, had Cybex’s children car seats for sale.   It is not disputed that these goods were supplied by Cybex with no relation to the Dickinson Group.   Of the other shops visited, no children car seats, clothing or bags bearing the Suit Mark were found to be offered for sale.

28.  With a view to establish use, Syto is relying on the following evidence adduced in the affirmation of Mr Li Yuok Lun Alvin (“Li), Managing Director of the Dickinson Group:

(i)    Cybex’s catalogues from 2010 to 2014 (“the Catalogues”);

(ii)   list of sales breakdown from 2014 to 2019 (“the Sales List”);

(iii)  sales transactions records relating to sales to Wing On Department Store, Sogo Department Store, Baby Trendyland Limited (“Baby Trendyland”) and other retailers in Hong Kong (“the Retailers Sales Records”);

(iv)  sales transactions records relating to cash sales to customers (“the Cash Sales Records”); and

(v)   sales transactions records relating to sales through Facebook and Carousell (“the Internet Sales Records”).

(c)  Analysis of the evidence

29.  In my judgment, none of these documents is able to establish any genuine use of the Suit Mark at least after 16 January 2017.

30.  The Catalogues are Cybex’s catalogues between 2010 and 2014 which were supplied to Dickinson NSFL when it was the distributor of Cybex’s children car seats, strollers and baby carriers.  It cannot support any sales or offers for sale using the Suit Mark after 16 January 2017.

31.  For the Sales List, I agree with Mr Shipp, counsel for Cybex, that the particulars provided therein are of no assistance because they are not solid or objective evidence to support the genuine use of the Suit Mark.

32.  In the Sales List, Syto has provided some particulars about the purported sales using the Suit Mark in the period from 2014 to 2019.  The dates, product names, sales figures and customers are some of the information provided in the Sales List.  So far as the product names are concerned, some of them are described by reference to the word “Cybex”.  Mr Jang, counsel for Syto, has also referred me to the Catalogues with a view to show that some of the products stated in the Sales List were actually the CYBEX products shown in the Catalogues.  The customers included Wing On and Sogo Department Stores, Baby Trendyland and other sales-by-cash and internet customers.  All the sales after 14 October 2016 were made to sales-by-cash and internet customers.

33.  In what constitutes solid and objective evidence of actual and sufficient use of the trade mark on the market concerned, Mr Shipp has referred me to the decision of the European Union Intellectual Property Office (“EUIPO”) in Supermac’s (Holdings) Ltd v McDonald’s International Property Co Ltd^[8].

34.  In Supermac’s,McDonald's is (or, rather, was) the owner of the word mark “BIG MAC” for goods and services in Classes 29, 30 and 42 under the EU Classification.  Supermac’s filed an application requesting the revocation of the registration of the “BIG MAC” mark for all classes of goods, on the ground that the mark was not put to genuine use for a continuous period of 5 years.  In response to the application, McDonald's submitted evidence that “BIG MAC” was used in a number of Member States, including in advertising materials and on the packaging of relevant products.

35.  The applicant noted that the evidence submitted by McDonald's would prove genuine use for sandwiches, but not in relation to the other goods and services for which the registration was obtained. McDonald's replied noting that the mark was genuinely used in Germany, France, and the United Kingdom, and that this would prove genuine use in the EU.  Furthermore, use of “BIG MAC” in relation to sandwiches would also mean use of the trade mark in relation to its ingredients.

36.  McDonald's submitted the following evidence: 3 affidavits signed by McDonald's representatives detailing sales figures for the period between 2011 and 2016; brochures and printouts of advertising posters dated between 2011 and 2016; printouts from a number of McDonald's websites dated between 7 January 2014 and 3 October 2016; a printout from a Wikipedia entry (in English) providing information on McDonald's Big Mac.

37.  The Cancellation Division of the EUIPO deemed such evidence insufficient to prove genuine use during the relevant period of time.  Although all evidence submitted had to be appreciated as a whole and entailed a degree of interdependence between the relevant factors (time, place, extent and nature of use), in that case the trade mark proprietor had failed to provide evidence that would prove genuine use throughout that period of time.

38.  Among other things, McDonald's had failed to provide third-party evidence and the brochures did not provide any details regarding how they were circulated and whether they led to any actual or potential purchases.  As regards the Wikipedia entry, the Cancellation Division was not impressed by that piece of evidence either, noting that anyone could amend Wikipedia entries.  As such, it would have been necessary to have that piece of evidence supported by "other pieces of independent concrete evidence".

39.  The Cancellation Division concluded that:

“Even if the goods were offered for sale, there is no data about how long the products were offered on the given web page or in other ways and there is no information of any actual sales taking place or any potential and relevant consumers being engaged, either through an offer, or through a sale. Finally, as far as the relevant services are considered, there is no single piece of evidence that refers to any of the registered services being offered under the EUTM.

It follows, that an overall assessment of the evidence does not allow the conclusion, without resorting to probabilities and presumptions, that the mark was genuinely used during the relevant period for the relevant goods and services. It is up to the EUTM proprietor to show such use in a manner which allows a reasoned conclusion to be made that the use is not merely token.”[9]

40.  I agree with these dicta of the Cancellation Division of the EUIPO.  If the trade mark proprietor has made genuine use of the mark, it should not be too difficult for it to provide solid evidence about the circumstances for such use.  Sales figures are not enough, as the court would not be able to know how the proprietor has made use of the mark in selling the products.  The court cannot say whether such use is made in accordance with the essential function of a trade mark, which is to guarantee the identity of the origin of the goods or services for which it is registered, in order to create or preserve an outlet for those goods or services.  Trade mark use of the mark is therefore important to establish genuine use.

41.  From the facts of the present case, there is reason for the court to believe that the sales made by the Dickinson Group after the termination of the 2^nd Distribution Agreement were left-over stock.  Under such circumstances, there was little incentive for the Dickinson Group to promote the sales by reference to the Suit Mark, as the whole purpose of these sales was to dispose of the left-over stock and the Dickinson Group naturally would not want any promotion of the Suit Mark to benefit Cybex.  It is therefore important for the court to know the circumstances under which the Dickinson Group sought to dispose of such stock.  It might well be the case that the Dickinson Group just told their potential customers that they had children products originated from Germany for sale without mentioning the brand name, let alone referring the potential customers to the Suit Mark in any promotional materials.  Hence, just by looking at the sales figures, it is not possible for the court to know whether there was any genuine use of the Suit Mark from such sales.

42.  In any event, the sales purportedly made to Wing On and Sogo Department Stores were all in 2014 with one isolated sale in November 2015.  The sales to Baby Trendyland were made between December 2015 and September 2016.  This would not be relevant in establishing any genuine use after 16 January 2017.

43.  The Cash Sales Records were dated between 2 June 2015 and 19 February 2019 and purported to be sales made by “Dickinson Co Ltd”. For the sales after 16 January 2017, only the following invoices appear to be relevant: 1 invoice dated 29 September 2017 for the sale of one CYBEX product; and 7 invoices dated between 9 May 2018 and 19 February 2019 but neither the CYBEX mark nor the Suit Mark appeared on any of these invoices.  Again without knowing how the Dickinson Group promoted or marketed these isolated sales, these invoices are not solid or objective evidence of actual or sufficient use of the Suit Mark on the market.

44.  That leaves the Internet Sales Records which consist of messages via online platforms, Carousell and Facebook, on various dates showing sales of goods to various customers in Hong Kong.  Li seems to suggest that these sales were made by one of his employees, Ms Kwok Sze Wai, upon his instructions to sell the CYBEX goods on these platforms.

45.  I agree with Mr Shipp that Li’s evidence in this regard is misleading.  Firstly, there are no documents from Facebook but only Carousell.  Secondly, the Suit Mark cannot be seen (or at least not clearly visible) from some of the pictures of the products offered for sale in Carousell, and the products were just described as German CYBEX products without referring to the Suit Mark.  Thirdly and more importantly, the profile of the seller in Carousell was one Bonnie Kwok using the name “@bonnie531”.  In an exchange regarding the costs of SF Express with a user, “vanilla mint”, who wanted to buy 8 baby carriers on behalf of a “mama group”, “vanilla mint” offered to pick up the goods herself.  In response, Bonnie Kwok said, “Not convenient for me. I am using my lunch time to do my private business.  You can cancel the bill if you think it’s too expensive”.  Hence, it was presented to the market and the customers that all the sales made through Carousell were private sales made by Bonnie Kwok and not any companies of the Dickinson Group.  In such case, even if these sales were conducted with the consent of the Dickinson Group, it cannot be regarded as genuine use of the Suit Mark by Syto or its related companies.

46.  Further, given the minute quantity of the sales and the circumstances under which the products were sold, these were only token sales which do not amount to genuine use of the Suit Mark.

47.  Based on such scanty evidence adduced by Syto, I have no hesitation in concluding that it has failed to discharge the burden of proving genuine use of the Suit Mark after 16 January 2017.

48.  There is a separate legal issue as to whether the selling off of remaining stock after the termination of the 2^nd Distribution Agreement can be genuine use.  Relying on cases such as Camellia TM and La Mer Technology Inc. v. Laboratories Goemar SA[10], Mr Shipp submits that the mere selling off of remaining stock by a distributor after the termination of a distribution agreement cannot amount to genuine use when it has no real intention to create or preserve a market share in Hong Kong.  Its real intention is to clear off remaining stock.

49.  I am not prepared to uphold such a wide proposition as submitted by Mr Shipp, simply because the sales are not made with the intention to create or preserve market share.  However, this is certainly one of the considerations for the court to determine whether such selling off of left-over stock amounts to genuine use of the trade mark.  As I have demonstrated above, the fact that the seller is just selling off the remaining stock after it ceased to be a distributor would give it very little incentive to promote the sales by reference to the relevant trade mark.  If the seller has no intention to maintain market share by reference to the use of the trade mark, it would be more difficult for it to establish genuine use of the mark through disposals of the left-over stock.

(d)     Other non-use grounds

50.  Based on my finding above, it is unnecessary for me to deal with the other grounds for non-use advanced by Cybex, i.e. there is no evidence of consent from Syto for use of the Suit Mark from 11 April 2016 and there was no “genuine” use after the termination of the 2^nd Distribution Agreement as any such use contravenes clause 6.3.1 of such agreement.

51.  However, I feel obliged to give some preliminary views on the ground relating to no genuine use based on the principle of ex turpi causa.  In putting forward such ground to support the Non-use Application, Mr Shipp is trying to introduce the concept of “permitted use” in the context of genuine use by the registered owner of the mark.  In other words, if the first common law user of the mark or the brand owner has not given permission to the registered owner to use the mark, any use of the mark by the latter cannot be regarded as genuine use for the purpose of s 52 of the TMO.

52.  I have some reservation with such bold proposition put forward by Mr Shipp.  There is no dispute that Charmie was the registered owner of the Suit Mark back in 2011.   As I will further elaborate in the latter part of this Judgment, I agree with the finding of the Hearing Officer that the Subject Application was not made in bad faith back in June 2011.  The introduction of the concept of “permitted use” under such circumstances would then require the court to conduct an exercise to determine the beneficial ownership of the registered mark in question and the contractual arrangement between the first common law user and the registered owner of the mark all under the umbrella of “non-use”.  The parties can resolve dispute of this nature in separate civil proceedings, and I am not certain whether the court should deal with these ownership and contractual issues in non-use proceedings.

53.  Further, as pointed out by Laddie J in Inter Lotto (UK) Ltd v Camelot Group Plc[11], the court has to consider the following matters in deciding whether to apply the principle of ex turpi causa: (i) whether or not a party’s behaviour has been so bad as to merit exclusion from protection by the court (which is an issue of fact); and (ii) the wrongdoing has to be substantial and go to the heart of the right sued on.[12]

54.  Based on the existing evidence, it is very difficult for the court to make any conclusive finding on such issue.  In any event, since the proposition advanced by Mr Shipp involves matters of some importance, I prefer to leave it for further argument in the future.  For the purpose of the present Non-use Application, I would just allow the application based on the lack of evidence of genuine use of the Suit Mark after 16 January 2017.

(e)  Time as to commencement of the Non-use

55.  I have also considered the question as to whether there is sufficient basis for the court to make a declaration of non-use commencing from an earlier date, i.e. before 16 January 2017.  S 52(7)(b) empowers the court to do so it“is satisfied that the grounds for revocation existed at an earlier date”.

56.  The starting point must be the information provided in the Sales List. In the Judgment above, I have already explained why the particulars contained in the Sales List and the supporting sales documents are not sufficient to establish genuine use.  However, I can see from the Sales List that there were continuous sales to the Wing On and Sogo Department Stores up to 12 December 2014.  That was the time shortly after the termination of the 2^nd Distribution Agreement.  Without going into the details of the contractual dispute between the parties, I am prepared to accept genuine use of the Suit Mark up to such date.  After that, there were only sporadic sales: 1 product to Wing On Department Store in November 2015, 13 products to Baby Trendyland from December 2015 to September 2016 and the others to cash and internet customers.  Without knowing how these sporadic sales were conducted as mentioned above, Syto has failed to establish genuine use of the Suit Mark by these sales.

57.  For these reasons, I find that the period of non-use commenced on 13 December 2014.

 APPEAL AGAINST THE DECISION OF THE HEARING OFFICER

(i)  Legal principles governing appeals from the Registrar    

58.  I then turn to the Appeal.  There is no dispute about the legal principles to be applied by the court in considering appeals from the Registrar:^[13]

(i)     An appeal court should not interfere with the decision of the Registrar, unless it was clearly wrong in principle, such as approaching the problem incorrectly, taking into consideration matters which he or she ought not to have taken into consideration or omitting to take into consideration matters which should have been considered.

(ii)   Once that test has been satisfied the court must then address the merits of the decision of the Registrar, and it should do so by way of a rehearing rather than by way of a review.  In that rehearing, the court should be slow to reverse the decision of an experienced hearing officer on a question which consists largely of a value judgment.  Naturally in the event that the error of principle which, by that stage, the court has already identified affects a value judgment of the hearing officer, that value judgment will have to be revisited and made again without the error of principle.  However if a value judgment is not vitiated by the error in principle then the court should show a real reluctance to interfere with it.

59.  I agree with Mr Shipp that in this Appeal, the court is not concerned with value judgments or exercise of discretion.  The Appeal does not concern matters such as assessment of distinctive character of a mark or dominant component in a mark.  Nevertheless, this court should not interfere with the decision of the Hearing Officer unless it was clearly wrong in principle.

(b)     Grounds for the Invalidation Application

60.  In the proceedings for the Invalidation Application before the Hearing Officer (“the Invalidation Proceedings”), Cybex was relying on 3 grounds:

(i)    bad faith ground under ss 53(3) and 11(5)(b) of the TMO;

(ii)   passing off ground under ss 53(5)(b) and 12(5)(a) of the TMO; and

(iii)  earlier rights and copyright ground under ss 53(5)(b) and 12(5)(b) of the TMO.

61.  The Hearing Officer found against Cybex on all the grounds.  In this Appeal, Cybex is only challenging the decision of the Hearing Officer on the bad faith ground and the copyright ground.

(c)  The evidence of the parties in the Invalidation Proceedings and the Decision of the Hearing Officer

62.  In the Invalidation Proceedings, Mr Johannes Schlamminger (“Schlamminger”), Managing Director of Cybex, made two statutory declarations in support of the Invalidation Application, whilst Li and Mr Cheung Yu Yan Tommy (“Cheung”), Director of the Registered Owner of the Dickinson Group, made statutory declarations on behalf of Syto to oppose the application.

63.  The relevant date for considering the Invalidation Application is 17 June 2011.  By that time, Charmie was the exclusive distributor of Cybex’s products in Hong Kong under the 1^st Distribution Agreement.

64.  In respect of the question of bad faith, there is a serious dispute between the parties as to whether the Subject Application was made with the authorization or consent of Cybex.

65.  According to Schlamminger, Cybex had given no such authorization or consent to Charmie.  His evidence was summarized in §§12 to 24 of the written decision of the Hearing Officer (“the Written Decision”).

66.  On the other hand, the evidence of Li and Cheung was set out in §§ 25 to 38 of the Written Decision.  In particular, Li mentioned the following:

(i)    After the making of the 1^st Distribution Agreement, there were discussions between the Cybex Group and the Dickinson Group about the trade mark protection issue in the Mainland and Hong Kong.

(ii)   &There was a conversation (“the Conversation”) between him and Mr Jerry Cho (“Cho”) of the Cybex Group on such issue.  During the Conversation, Cho mentioned that the Cybex Group would like the Dickinson Group to apply for registration of Cybex’s trade marks because it did not want its Hong Kong company to hold the marks due to concerns under German tax or accountancy regulations.

(iii)  There were emails exchanged in May 2011 informing the Cybex Group about the registration of the Chinese mark for the CYBEX products, “賽白斯” (“the Chinese Mark”), by the Dickenson Group in Hong Kong.

(iv)  The trade mark certificates for the Suit Mark and the Chinese Mark were sent to the Cybex Group in the email dated 2 April 2012, and the Dickerson Group had not received any objection or complaint regarding these registrations.

67.  There is no dispute about the legal principles for bad faith set out by the Hearing Officer in §§39 to 46 of the Decision.

68.  The reasoning of the Hearing Officer on the bad faith ground can be found in §§52-57 of the Written Decision which can be summarized as follows:

(i)    She accepted the evidence of Li that he had obtained authorization and consent from Cho (in particular in the Conversation) in registering the Suit Mark, as Cybex Group did not wish to register and hold Cybex’s trade marks in the Mainland and Hong Kong for German tax or accountancy reason and that a copy of the Hong Kong registration of the Chinese Mark and the Suit Markhad been sent to Cho and Mr Aloysius Kee (“Kee”) of the Cybex Group on 2 April 2012.[14]

(ii)   There was no evidence adduced by Cybex expressly denying the Conversation or the giving of such authorization by Cho.  Nor was there any evidence denying the receipt of the trade mark certificates of the registrations of the Suit Mark and the Chinese Mark in Hong Kong.  Cho only told Schlamminger that he did not remember being aware of the Subject Application and he would have understood that any such registration must necessarily have been made and held on behalf of Cybex.[15]

(iii)  Although Schlamminger averred that there was no logical or commercial reason why Cybex would want a mere distributor to take over ownership of its trade marks, Clause 2.17 of the 2^nd Distribution Agreement provided for the possibility for Dickinson NSFL to seek consent from Cybex for intellectual property right registrations and Dickinson NSFL had to transfer back to Cybex the registered rights at a symbolic price after the termination of the distribution agreement.[16]

(iv)  Given the disputes developed between the two groups resulting from the termination of the 2^nd Distribution Agreement, the Hearing Officer did not accept that Dickinson Group’s conduct after the termination of the 2^nd Distribution Agreement (i.e. refusal to transfer the registration of the Suit Mark back to Cybex) could cast any light backwards on the intention of the Dickinson Group at the time of the making of the Subject Applicant.  In any event, these were two separate and distinct matters.[17]

(v)   The fact that the Cybex Group had applied in its own name in other jurisdictions for the registration of its marks did not undermine the fact that it had authorized the Dickinson Group to make the Subject Application in Hong Kong.[18]

(vi)  The Hearing Officer found that on the balance of probabilities, the Dickinson Group at the time of the Subject Application had a genuine belief that it was authorized by the Cybex Group to make the Subject Application, and the Cybex Group was aware of the filing of the Subject Application both before and after it was made.  Hence, the Subject Application would not be regarded as having made in bad faith by persons adopting proper standards.

69.  The reasoning of the Hearing Officer in dismissing the Invalidation Application on the copyright ground can be found in §§67 to 72 of the Written Decision.

70.  S 53(5) of the TMO provides that the registration of a trade mark may be declared invalid on the ground that there is an earlier right in relation to which the condition set out in s 12(4) or (5) (relative grounds for refusal of registration) is satisfied.  S 12(5)(b) of the TMO provides that a trade mark shall not be registered if, or to the extent that, its use in Hong Kong is liable to be prevented by virtue of an earlier right such as copyright or registered designs.  However, s 53(6) provides that s 53(5) shall not apply if the owner of the earlier right has consented to the registration.

71.  On such copyright ground, the Hearing Officer held that:

(i)    Since Schlamminger’s evidence in relation to copyright ownership of the Circular Device is not challenged by Li, it was not proper for Syto to challenge Cybex’s ownership of copyright subsisting in the Circular Device in the Invalidation Proceedings.

(ii)   As Cybex had given consent to the Dickinson Group to make the Subject Application, s 53(6) applies preventing the Registrar from declaring the invalidity of the Suit Mark under s 53(5)(b).

(b)  &Challenge based on the bad faith ground

72.  Mr Shipp relies on the following grounds to challenge the decision of the Hearing Officer on the bad faith issue:

(i)    Li’s allegations are not supported upon a careful reading of the emails exchanged between the parties, as the emails only refer to the registration of the Chinese Mark devised by the Dickinson Group and not the Suit Mark.  Further, silence after receipt of the emails cannot amount to consent.

(ii)   It was wrong for the Hearing Officer to draw adverse inference against Cybex for not calling Cho or Kee to give evidence on its behalf, as there might be a lot of legitimate reasons as to why they could not do so.

(iii)  The Hearing Officer took into account irrelevant consideration, i.e. clause 2.17 of the 2^nd Distribution Agreement, in considering the question of bad faith at the time of the making of the Subject Application, when there was no such provision in the 1^st Distribution Agreement which was in force between the parties by that time.

(iv)  The Hearing Officer’s observation is perverse when she said that the refusal of the Dickinson Group to assign the Suit Mark back to Cybex after the termination of the 2^nd Distribution Agreement could not shed any light on the question of bad faith when Charmie made the Subject Application in 2011, in particular the Dickinson Group is claiming that it was making the Subject Application at the request of the Cybex Group.

73.  I find no merit in these challenges.

74.  For the first ground, the Hearing Officer relied on the Conversation between Cho and Li in finding that the Cybex Group had given authorization, or at the very least consent, to the Dickinson Group to make the Subject Application.  The emails were only part of the evidence taken into consideration by the Hearing Officer in making the said finding.  In any event, it is clear from these emails that the parties did discuss the trade mark protection issue in the Mainland.  In the email dated 13 May 2011, Ms Connie Wong (“Wong”) of the Dickinson Group notified Cho that the Cybex Group had already registered the Circular Device as a trade mark in the Mainland, and that the Dickinson Group would proceed to register the Chinese Mark in the Mainland and Hong Kong.  Though the emails might not have touched upon the registration of the Circular Device in Hong Kong, the emails clearly show that the parties had been engaging in trade mark protection discussion by that time.  This provides the background for the Conversation to take place.  Given the issues discussed, it would be hard to imagine that the parties had not talked about the registration of the Circular Device in Hong Kong.  In my judgment, the Hearing Officer was entitled to make the findings about the making of the Conversation and the sending of the email dated 2 April 2012, and there is no basis for the court to disturb such factual findings.

75.  For the second ground, I do not accept that the Hearing Officer had drawn any adverse inference against Syto for not calling Cho or Kee to give evidence.  The Hearing Officer just pointed out that there was no evidence to rebut the express evidence of Li that: (i) the Conversation did take place as alleged; and (ii) the emails dated 2 April 2012 was sent to the Cybex Group enclosing, inter alia, the trade mark registration documents of the Suit Mark.  Furthermore, the Hearing Officer observed that Cybex had not made any application to cross-examine Li.  There are authorities to suggest that the court should be cautious in deciding question of dishonesty on affidavit evidence alone untested by cross-examination.  If cross-examination is not sought, inference of a deponent’s dishonesty ought not to be drawn unless irresistible.[19] Again there is no basis to disturb the Hearing Officer’s findings on such ground.

76.  The third ground is about a criticism that the Hearing Officer had taken into account irrelevant consideration, i.e. Clause 2.17 of the 2^nd Distribution Agreement which was made in February 2013, in determining the intention of the Dickinson Group when it made the Subject Application in June 2011.

77.  Despite the able submission of Mr Shipp, one has to understand that the Hearing Officer was only relying on this point to deal with Cybex’s allegation that there should be no commercial reason for the Cybex Group to have asked the Dickinson Group to make the Subject Application in its own name.  Though the Hearing Officer had made reference to Clause 2.17 of the 2^nd Distribution Agreement which had yet been in force at the time of the Subject Application, what the Hearing Officer was referring to in substance was the commercial arrangement and perhaps the legal right to compel the Dickinson Group to transfer the registered Suit Mark back to the Cybex Group.

78.  One can perhaps test the reasoning in this way.  There is no dispute that the Cybex Group knew full well that the Dickinson Group had registered the Chinese Mark in the Mainland and Hong Kong in the name of its own companies. As a brand name, the Cybex Group should have known that the Chinese Mark would be used together with English Mark and the Circular Device to promote and market the CYBEX products in the Mainland and Hong Kong.  Despite that the Chinese name might have been chosen by the Dickinson Group, the Cybex Group would have no hesitation in saying that it is the owner of the goodwill associated with the Chinese Mark because the mark has been used exclusively to market its own products, and yet the Cybex Group was contended for the Dickinson Group to hold the registrations of the Chinese Mark.   This must be based on some belief that the Dickinson Group would transfer these registrations back to the Cybex Group as part of their commercial arrangement.  In this sense, the Hearing Officer had not taken into account irrelevant consideration in reaching her decision.

79.  In respect of the fourth ground, I do not find anything perverse when the Hearing Officer refused to take into account Dickinson Group’s refusal to transfer the registration of the Suit Mark back to the Cybex Group in considering the question of bad faith.  According to Mr Shipp, if the Subject Application was made by Charmie upon the instruction of the Cybex Group as alleged by Syto, there is no reason why the Dickinson Group did not transfer back the registration of the Suit Mark after the termination of the 2^nd Distribution Agreement.   Such refusal therefore supports that the Subject Application was made by Charmie in bad faith back in 2011.  In other words, the Dickinson Group must have had some kind of intention to snatch the Suit Mark back in 2011.

80.  The Hearing Officer disagreed.  She took the view that the refusal on the part of the Dickinson Group to transfer back the Suit Mark was caused by the dispute between the parties resulting from the termination of the 2^nd Distribution Agreement.  From the evidence of Li, the Dickinson Group took the view, rightly or wrongly, that the Cybex Group had wrongfully terminated the 2^nd Distribution Agreement causing substantial loss to the Dickinson Group.  The Dickinson Group therefore refused to assign back the Suit Mark to maintain its bargaining power.  More importantly, there is no evidence to suggest that the Dickinson Group had used the Suit Mark on its own products or made any commercial exploitation of the Suit Mark for its own financial gain.  All the Dickinson Group did was to dispose of its left-over stock and, perhaps, to hold on to the registration of the Suit Mark with a view to make it less legitimate for the Cybex Group to continue its business in Hong Kong.  Under such circumstances, the Hearing Officer was certainly entitled not to take into account the subsequent refusal for transfer of the Suit Mark in inferring bad faith in the making of the Subject Application back in 2011.

81.  The Hearing Officer was therefore entitled to make the decision not to invalidate the Subject Application on the bad faith ground.  Even if this court has to consider the question afresh, I would have come to the same conclusion.

82.  From the documentary evidence, it would be quite impossible for Cybex to argue that there was no discussion between the parties on trade mark protection issue in 2011 when the Dickinson Group started to market the CYBEX brand and products in the Mainland and Hong Kong.  Given that the work of the Dickinson Group was to promote and market the sales of the CYBEX products, the Dickinson Group would have to ensure that there would be adequate protection for the various trade marks associated with the CYBEX products, which also provides the background for the Conversation to take place.  In particular, the relationship of the parties was good by that time.  Coupled with the fact that: (i) there is no evidence to rebut Li’s evidence; (ii) Cybex had not applied for Li to be cross-examined; and (iii) there is undisputed evidence that the Cybex Group was contended for the Dickinson Group to hold the registration of the Chinese Mark both in the Mainland and Hong Kong, I would accept Li’s evidence about the Conversation and the sending of the email dated 2 April 2012.  Based on Li’s evidence, there is reason for the court to say that the Cybex Group had authorized or consented for the Dickinson Group to make the Subject Application.  At the very least, the fact supports genuine belief on the part of the Dickinson Group that the Subject Application was authorized by the Cybex Group.  Hence even if I have to consider the question afresh, the result would be the same.

83.  I therefore reject the challenge based on the Bad Faith Ground.

(c)  Challenge based on copyright ground

84.  I also find no merit in the challenge based on the copyright ground.

85.  Mr Shipp submits that the approach taken by Hearing Officer is oversimplified.  According to him, the wording of s 12(5)(b) does not deal with the act of registration but also deals with the use of the mark.  In the present case, the right of the Dickinson Group to use the Suit Mark arose from the Distribution Agreements and not from the registration of the Suit Mark.  Likewise, the licence to use the copyright subsisting in the Suit Mark arose from the Distribution Agreements.  Any registration of a trade mark gives no parallel rights to the underlying copyright.  Once the Distribution Agreements were terminated, the licence to use the copyright also terminated.  In the premises, the consent given (if any and which is denied by Cybex) to register the Suit Mark was not unconditional for it was subject to the underlying copyright and the terms of the Distribution Agreements.

86.  Mr Shipp submits that such analysis is consistent with the principles of trade mark law, because the statutory right conferred by a registration does not give the owner a right to use the registered mark but a right to exclude others from using it.  The owner of a registered trade mark does not have an entitlement to use the mark in the face of earlier competing rights owned by someone else.  Therefore if a trade mark owner cannot use the mark because of an earlier right, such as copyright, the purity of the registration cannot be maintained and its remaining on the register serves no utility whatsoever.  In the premises, the Suit Mark ought to be invalidated.

87.  I disagree.  S 53(6) of the TMO makes it very clear that there will be no invalidation under s 53(5) if the owner of the earlier trade mark or other earlier rights (in this case the copyright of the Circular Device) has consented to the registration.  As the Hearing Officer found as a matter of fact that the copyright owner of the Circular Device had consented to the Subject Application, that is the end of the matter and there would be no need to make any further inquiry relating to the condition for the use of the copyright work under s 12(5)(b).

88.  To me, s 53(6) has set a clear and simple demarcation for the operation of the trade mark registration regime.  If the owner of the earlier trade mark or other rights has given consent to the registration, then there is no reason why the Registrar or the court should carry out any further inquiry in the invalidation proceedings.  In carrying out the sort of investigation as suggested by Mr Shipp, the Registrar or the court will then have to engage in the inquiry relating to the contractual dispute arising from the licence or distribution agreement.  Obviously, there is more appropriate forum for the parties to resolve such kind of dispute.  Given the clear wording in s 53(6), there is no reason why the Hearing Officer had to carry out any further inquiry as suggested.

89.  For these reasons, the Hearing Officer was also right in dismissing the Invalidation Application based on the copyright ground.

FINAL ORDER AND COSTS

90.  I therefore allow the Non-use Application and revoke the registration of the Suit Mark with the period of non-use commencing from 13 December 2014.  I also dismiss the Appeal in HCMP 172/2020.

91.  I have listened to the parties’ submissions on costs.  They both agree that costs should follow the event.  In principle, Cybex should get the costs in HCMP 75/2020 and Syto the costs in HCMP 172/2020.

92.  In order to avoid further unnecessary costs in taxation proceedings, I suggest to make an order setting off both parties’ costs.  However, the costs of the Non-use Application should be higher as such application involves the preparation of affidavit evidence whereas there are no such costs in the Appeal.  Since I have not listened to the parties’ submissions on such proposal, I make a costs order nisi that save that Syto do pay to Cybex the costs of and associated with the preparation of the affidavit evidence in HCMP 75/2020, there be no order as to costs of both sets of proceedings.  The order nisi shall be made absolute 14 days after the date of the handing down of this Judgment.