Burberry Ltd and Another v. Cheung Ko Ming and Others

HCA 1103/2013

ACTION NO 1103 OF 2013

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J U D G M E N T
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1.The plaintiff is a world‑renowned producer of high quality of fashion items and accessories, principally for women though not exclusively so.  It has an easily recognised, distinctive marque known as the “Burberry Check” which is based on the tartan or plaid pattern type but is not, for obvious reasons, a tartan or plaid associated with any recognisable clan. It is unique.  It is easily copiable and may be subject to subtle or not so subtle variations in form so as to be applied to products which are not from the genuine Burberry source, so as to invade its market by seducing customers into a state of mind in which they believe they are purchasing the genuine product or are confused into thinking that they may be purchasing such a product.

2.In any market which lacks a discipline over imitators of a genuine product there will be purchasers who will obtain such goods indifferent to whether they have the genuine product or not.  A distinctive style or trade‑mark is eye‑catching and the casual observer or passer‑by may be impressed by the fact that the wearer or bearer of such an item, or who is in some way flaunting its expensive taste, has the means with which to do so.  Genuine Burberry goods retail at the upper end of the fashion market or price.

3.As a consequence, for their own business and for the protection of customers who spend money in purchasing their high‑quality goods, Burberry needs to take the appropriate steps to identify and suppress imitators whose only object is to make money out of their activities in manufacturing and trading upon their fraudulent application of the insignia of the genuine product to their counterfeit goods.

4.Against this background Burberry have taken proceedings against a number of entities in Hong Kong who have been dealing in a number of items such as bags, handbags and other accessories bearing the Burberry trademark, which are not genuine Burberry goods, ie are counterfeit goods as a consequence, and which thereby infringe, a somewhat euphemistic term in these circumstances, their trademark and thus pass‑off such goods as genuine.

5.This is the plaintiffs’ application for summary judgment against the first six defendants and for a “quia timet” injunction against the seventh.

THE DEFENDANTS

6.All are represented by the same solicitors and counsel, indicating that there is no conflict between them.  Despite this there are five separate defences served.

7.The first relates to the 1^st defendant but involves the 5^th defendant. That of the 2^nd and 6^th defendants equally seems to involve the 5^th defendant and, in addition the 1^st defendant.

8.The third defence is that of the 3^rd and 4^th defendants and pleads that they were employees of the 6^th defendant “at all material times”.

9.The defence of the 5^th defendant principally pleads that it “has no business activity and has been dormant since the date of its incorporation”, but involves other defendants in its pleading.

10.Finally there is the defence of the 7^th defendant.  It is in essence a denial of the plaintiffs’ case against it.  It seems to rely on an averment that it was originally set up for trading purposes, “specifically the import and export of foodstuffs.”  It makes no averment of the actual nature of its trading activity.

11.All the defences contain a “”mish‑mash” of material which is irrelevant to the specific cases of the respective defendants.  They are undisciplined pleadings.

12.Furthermore all put matters in issue (by way of not admitting the nature, status and relevant facts concerning the nature of the plaintiffs’ business) indicating yet further that no sensible discipline has been exercised in relation to the defences pleaded.

THE PLAINTIFFS’ CASE

(1) The 1^st defendant

13.He was for a period director of the 5^th defendant and partner of the 6^th defendant trading from Shamshuipo premises.  Between 2004 and 2010 he was the “de facto” owner and controller of Polo Santa Roberta Limited, a Hong Kong company.  The plaintiffs had brought proceedings against that company for infringement of the Registered Trademark in October 2010.  That company brought proceedings to revoke the Registered Trademark of the plaintiffs which were dismissed.

14.He was also sole director and effective owner of Santa Roberta Polo & Racquet Club International Limited incorporated in England and Wales with its registered office in Cardiff.  It had registered in Hong Kong two trademarks (for fabric and handbag designs) which were invalidated in February 2012 by this court (per DHCJ Burrell).

(2) The 2^nd defendant

15.She is the owner of the 6^th defendant business trading from the Shamshuipo premises.  She is the sole director and effective owner of the 5^th defendant. She is also director and shareholder of Polo Santa Roberta Limited.

(3) The 3^rd defendant

16.She is an employee of the 1^st, 2^nd and 6^th defendants, and of Polo Santa Roberta Limited.  She described herself as Marketing Manager of Polo Santa Roberta Limited in an affirmation on its behalf.  She also stated that she was an employee of the Wales (Cardiff registered) company Santa Roberta Polo, with a residential address in Cardiff.

(4) The 4^th defendant

17.She was an employee of the 1^st, 2^nd and 6^th defendants. She was arrested by the Customs & Excise Department at the Shamshuipo premises during a raid there in August 2010.  At a trial she was acquitted, her defence having been that she did not know that the products seized (871 out of the 961) bore the Burberry Check trademark.

(5) The 5^th defendant

18.It was incorporated in Hong Kong and had its registered offices at the Shamshuipo premises since August 2013.  It is under the control of the 1^st and 2^nd defendants.  It applied for trademark revocation of the plaintiff’s Registered Trademark in July 2012.

(f) The 6^th defendant

19.This is a partnership of the 1^st and 2^nd defendants conducting business from the Shamshuipo premises.

(g) The 7^th defendant

20.The 1^st defendant is the sole director and effective owner.  It was incorporated in May 2014 and is ready to run the business at the Shamshuipo premises.

THE SCENARIO

21.The business at the Shamshuipo premises is controlled and/or conducted by the 1^st and/or 2^nd defendants, together with the 3^rd and 4^th defendants, through a partnership firm (the 6^th defendant) and two corporate entities (the 5^th and 7^th defendants).

22.Its nature is the sale/supply of handbags, wallets, cosmetic bags, suitcases and other products bearing imitations of the Burberry Check pattern which are thereby counterfeit goods.  This is the basis of “passing‑off” activity.

23.The alleged trademark infringement is part and parcel of the same picture.

THE EVIDENCE

24.A catalogue entitled “Polo Santa Roberta” was issued by the defendants and offered to the plaintiffs’ investigators in January 2013.  Fifteen pages of that catalogue show photographs of goods bearing pictures of the Burberry trademark or variations of it which, unarguably in my judgment, constitute infringements of the registered trademark in all respects.  That is clear evidence of “passing‑off”.

25.The photographs in Schedule A attached to the writ, consisting of 14 pages and depicting a substantial number of items clearly replicate in the form, style and substance the plaintiffs’ registered trademark.

26.It is not disputed that all the items in question, ie the subject of these proceedings, were seized from or purchased at one or more of the premises of which any one or more of the defendants had control and/or management of a business selling or offering for sale such items.  The principal premises are those at Shamshuipo.

Identical copying or similarity

27.In many respects the distinctive pattern and mark which forms part of the material is directly copied.  In other items it is strikingly similar.  The change of angulations does not affect the impression of copying.  The quality is variable but not obviously so.

28.Section 18 of the Trademark Ordinance states that it is infringement if a person “… uses a sign which is identical to the trademark in relation to good or services which are identical to those for which it is registered.”

29.On being asked to state his best point (in the defence) Mr Gary Leung conceded that there were goods produced and/or sold by the defendants, or any one or more of them, which fall squarely within the definition in that subsection.  His surviving contention on this aspect is that where such identical trademark is used “in relation to goods or services which are similar to those for which it is registered”, it has to be shown that such is likely to cause confusion on the part of the public.  Simple variations on the theme of a trademark that leaves the theme and trademark intact and coherent, and instantly recognisable, do not confuse or make available to a counterfeiter a tenable defence.

30.I find as a matter of fact that although the vast majority of the public who see displayed for sale and is contemplating a purchase would say to themselves, “That is the Burberry mark, sign or style”, some may well be confused especially if the price is significantly less than would be expected for the genuine article.  Passing through their minds would be a number of possible explanations; the goods are what is known as ‘seconds’ having failed a quality control test; they are being sold by a recognised agent who has a licence from Burberry so to do; the products may be what is known as liquidated stock from a failed outlet; they may be from an earlier fashion season and therefore are cheaper since they have been replaced by the latest fashion items demanded by a fashion conscious market.  Pricing therefore is an entirely neutral factor and irrelevant.  Ultimately the vital self‑asked question is: “Are we getting the genuine product at a discount, or are we buying a convincing copy?”  so that is the only basis for any mental query: “This is represented to me as a genuine Burberry article at a low price.  It has all the appearance of being the genuine article — a Burberry item — but it could be fake.”

31.The appeal of such goods, whatever their provenance, is to a status‑conscious, essentially female, market which essentially wants to be seen clothed in Burberry apparel or sporting Burberry accessories.  The member of such market will not be overly concerned with the proper status of the products; appearance is everything and they wish to be seen as being able to afford such coveted items.  Some members may well regard a particular item as counterfeit but not be deterred from buying simply on that count.  They in their turn, hope to “pass it off” as genuine.  In my judgment there is no apparent likelihood of confusion in the defendants’ use of the trademark but that is not to exclude the possibility of confusion arising in the mind of a customer.  That would depend entirely on the customers’ approach to the pricing of the goods.  The immutable factor is that these goods by their infringement of the trademark unquestionably appear to be Burberry goods by reason of the use of the trademark, however varied that may be by angulations or broadening of the colour lines, or even by changes in the colouring itself.  Any such state of mind, if it be properly so‑called, does not, of course, aid the defendants.

32.The position is well illustrated by the terminology in a European Court of Justice decision: SA Sociéré LTJ Diffusion v Sada Vertbandet SA [2003] FSR 34:

“53. Since the perception of identity between the sign and the trademark is not the result of a direct comparison of all the characteristics of the elements compared, insignificant differences between the sign and the trademark may go unnoticed by an average consumer.

54. … a sign is identical with the trademark where it reproduces, without any modification or addition, all the elements constituting the trademark, or where, viewed as a whole, it contains differences so insignificant that they may go unnoticed by an average consumer.”

33.I add Kitchin LJ’s observation in The Specsavers case:

“The average consumer [a purchaser of handbags, purses, etc] normally perceives a mark as a whole and does not proceed to analyse its various details.”

34.In any event it is no part of the defendants’ case that their signs are significantly different from that of Burberry.  The range of goods which the defendants have and market is identical to that of Burberry.  That is not gainsaid either.

35.By reason of the foregoing there is no triable issue on confusion.  I have had regard to the cases relied upon.  Of course as Carlye Chu J (as she then was) in The Garden Company Limited v Smart Year Limited [2009] 5 HKLRD 542 reminded us: “much depends on the facts of the case.”  In that case there can be no such argument based on confusion which could give rise to a credible defence.  The evidence is all one way.

The suggested defence of honest concurrent use

36.There are vague assertions about the use of a Scottish Tartan Pattern since as early as the 1980’s.  The 1^st defendant’s affirmation of 19 October 2015 is utterly unconvincing.

37.The plaintiffs’ use of the trademark in Hong Kong comfortably predated the time relied upon by the 1^st defendant.  There is not one scintilla of evidence or reliable statement to indicate honest use.

38.I accept and adopt the plaintiffs’ solicitors’ assertion that it is inconceivable that the defendants were unaware of the plaintiffs’ Burberry Check when they set about the establishment of a business selling such products, particularly of the type that correspond to the plaintiffs’ own products.  Given the fashion nature of the business they must have known of the plaintiffs’ trademark from magazines, shop displays, the world‑wide reputation and “hallmark” of Burberry goods, and simple observation of people wearing or carrying such products for many years and, I am satisfied, well before the 1980’s in Hong Kong.  Conclusively, they were well aware from earlier litigation of their impermissible activities.

Passing off

39.Reflecting Lord Oliver’s pithy encapsulation of the law: “No man may pass off his goods as those of another”, the defendants’ use of the Burberry trademark exactly offends that prohibition.  The goodwill and reputation (one could say fame) of the Burberry mark and product is well established and nothing has been put forward by the defence to question this.

40.In my judgment the defendants’ infringing activities are “calculated (ie likely) to deceive”.  I have no doubt that most purchasers (or simple observers) of the goods for sale, will either have been deceived into thinking that the goods are genuinely Burberry products, or if they have lingering thoughts that they are or may be counterfeit copies, they pass as convincing replicas of the genuine article:

“Whether two marks are deceptively similar to one another is for the judge to decide … he is entitled to make a decision based on his own experience even in the absence of evidence. Thus it has been said that the question of whether the resemblance is too close is one for the tribunal and not the witness.”

Judges are no more likely to shut their eyes on passing a Burberry’s store than one hopes Counsel are, fearing lest their judgment be blurred or clouded by awareness of what the fashion world has to offer in its distinctive style, format, and presentation.

41.In passing I should add at this stage that the defendants’ application of the Santa Roberta logo with a polo pony, is itself not so different in form or substance from Burberry’s Black Knight (on initial acquaintance at least), however positioned or with whatever prominence it is given.  It would not detract from the overwhelming impression of the Burberry mark which is unique in form and concept.

42.The use of the name Santa Roberta, if fixed in the mind of the customer, would merely leave in that of the average consumer that there was some arrangement or link between Burberry and Santa Roberta whereby the latter could market Burberry goods, using its trademark and motif, in this form, by licence or otherwise.  What would stay in the mind, and the eye, would be the iconic pattern, vertical, horizontal and on occasions set at a diagonal.  That would be the overriding interest and ultimate satisfaction.

43.Beyond question the plaintiff has established a goodwill or reputation attached to the goods; secondly, a misrepresentation by the defendants to the public leading, or likely to lead, the public to believe that the goods offered by him/them are the goods of the plaintiff has been demonstrated; and thirdly, the plaintiff must demonstrate that it suffers, or is likely to suffer, damage by reason of the consequent erroneous belief that the source of the defendants’ goods is the same as that offered by the plaintiff which it has done.  This is a précis and application of Lord Oliver’s statement of the elements of the tort.

The defendants’ responsibility and earlier litigation

44.The 1^st and 2^nd defendants are husband and wife.  The 3^rd and 4^th defendants are employees of the 5^th and/or the 6^th defendant and possibly the 7^th defendant.

The 3^rd defendant

45.She describes herself as a merchant deposing in her affirmation from an address in Cardiff, Wales, and as employee of Santa Roberta Polo & Racquet Club International Limited whose registered address was in Cardiff. She was involved in an action brought by the plaintiff to obtain revocation of that company’s designs registered in Hong Kong.  She was fully acquainted with the issue concerning the plaintiffs’ trademark, seeking to support the defendants’ argument with detailed knowledge of the trademark and designs at issue.  By the time she was sworn to that affirmation in August 2011 she well knew the nature of the defendant’s goods and the plaintiffs’ contentions.  The plaintiffs’ proceedings succeeded.  She was the marketing manager of the 5^th defendant at the Shamshuipo premises.  She is the sister of the 1^st defendant.  In January 2013 she provided a catalogue advertising a wide range of infringing goods to investigators on the Shamshuipo premises.

The 4^th defendant

46.She was arrested in August 2010 at the Shamshuipo premises.  She was acquitted on the strength of the defence that she did not know that the goods were infringing and/or counterfeit.  Thereafter she was saddled with knowledge of both infringement and supply of counterfeit goods.  She was still working at the Shamshuipo premises on 3 December 2012 when infringing products were offered or displayed for sale at those premises; and in May 2013 infringing products were offered or exposed for sale at the same premises.

The 6^th defendant

47.This is a partnership of the 1^st and 2^nd defendants, husband and wife.  As joint and several tortfeasors they are liable for the activities of the partnership.  They and the partnership were concerned with the infringement for part of the material period.  For an earlier material period the 2^nd defendant was its sole proprietor.

The 5^th defendant

48.The 1^st defendant and his wife were directors of Polo Santa Roberta against which a summary judgment was obtained on 17 January 2012 in respect of the same causes of action and the same types of goods.  The signs registered by this business were revoked.  The 5^th defendant had as its directors over a material period of time both the 1^st and 2^nd defendants.

49.A company incorporated in England and Wales with a similar name — Santa Roberta Polo & Racquet Club International Limited (see §  ) had the 1^st defendant as its sole director.  It had filed applications for registration of designs for handbags similar or identical to Burberry’s products.  They were revoked.

The 7^th defendant

50.The 1^st defendant is its sole shareholder (and director until July 2015).  Its address is the Shamshuipo premises. It holds itself out as conducting the same type of business as has been conducted hitherto at those premises.

51.It is clear that all four individual defendants (1^st to 4^th) are closely involved in the nature of the businesses of the 5^th to 7^th defendants.  Past history in relation to identical or similar businesses shows the 1^st and 2^nd defendants being well aware of the plaintiffs’ claims and actions and the existing court decisions against their businesses in relation to their infringing and counterfeiting activities.  It is unnecessary for me to go into greater detail.

52.Over the years the 3^rd and 4^th defendants have been closely concerned with the running of these businesses and have been well aware of the infringing and counterfeiting nature of the products passed off as Burberry goods.

53.The recent emergence of the 7^th defendant is the clearest indication of the intention to continue the tortious/criminal activities regardless of past and current litigation and judgments.

54.There will be judgment against all defendants — in respect of the 7^th defendant a “quia timet” injunction — as prayed.

55.I have of course applied my mind to and exercised the principles to be followed in granting summary judgment.  The defendants’ cases are simply incredible and the plaintiffs’ claim unanswerable.

Damage

56.The plaintiffs are entitled to any receipts from the sales of the offending items. The defendants are not entitled to set off any expenses or costs incurred in achieving those sales.  The simple rationale for this is that the defendants have received sums of money from these fraudulent activities by passing off those goods as if they were genuine products of the plaintiffs and therefore the price at which they are sold is that due to and recoverable by the plaintiff. This will of course entail such records of the sales as are kept by the defendants.

57.A less easily quantifiable loss, but a loss nevertheless, is the loss to and effect upon the plaintiffs’ business of the sale of inferior goods.  The basis for such a claim, whatever the difficulties there may be in quantification, is the obvious potential damage done to the plaintiffs’ goodwill and reputation by reason of the fraudulent production and sale on the open market of inferior and counterfeit goods.

58.Both these aspects will call for investigation, examination of records, exercises in accountancy, and expert assessment of loss in this field of business.

59.Accordingly I made the orders necessary and as sought under paras 3 to 9 of the Amended Statement of Claim.  There will also be an order for the defendants to pay the plaintiffs’ costs of this action.  If an order for indemnity costs is being sought, and it is opposed, then I will accept short, ie no more than two pages, written submissions in order to determine this.

Mr Henry Wheare of Hogan Lovells, for the 1^st and 2^nd plaintiffs

Mr Gary Leung, instructed by Bruno Yiu & Co,for the 1^st to 7^th defendants