Nerium Biotechnology, Inc Nerium Skincare, Inc Nerium Skincare HK Ltd v. Nerium International, Llc Nerium International Hong Kong Limited
Read the full judgment text of HCA 1188/2016 on BabelCite. This High Court CFI judgment was delivered on 29 March 2018.
1. On 5 May 2016, the Plaintiffs issued a writ against the Defendants claiming an injunction against the Defendants. There are, in essence, 3 heads of claim. The first head next to restrain the Defendants from infringing the Plaintiffs’ registered trade marks particularised in paragraph (1)(a) of the writ and infringing the Company Agreement of Nerium International LLC (“the 1 st Defendant”) effective as of 25 October 2010 by, without the written licence or consent of the Plaintiffs, using in
Cited by 3 cases · Cites 17 cases
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HCA 1188/2016 [2018] HKCFI 674 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1188 OF 2016 ________________________
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________________________ REASONS FOR DECISION: ________________________ INTRODUCTORY MATTERS Procedural history
1.On 5 May 2016, the Plaintiffs issued a writ against the Defendants claiming an injunction against the Defendants. There are, in essence, 3 heads of claim. The first head next to restrain the Defendants from infringing the Plaintiffs’ registered trade marks particularised in paragraph (1)(a) of the writ and infringing the Company Agreement of Nerium International LLC (“the 1st Defendant”) effective as of 25 October 2010 by, without the written licence or consent of the Plaintiffs, using in the course of trade or business any of the signs set out in paragraph (1)(a) of the writ. The claim is pursuant to section 18(3) of the Trade Marks Ordinance, Cap 559. 2.A further basis for seeking the injunction appears in paragraph (1)(b) which seeks the restraint of the Defendants from various acts including selling in Hong Kong a variety of commercial products which are not manufactured by the 1st and/or 2nd Plaintiff using certain Registered Marks; certain infringing marks or any mark which contains the word Nerium without the written licence of the Plaintiffs including certain products set out in Annexure B in the Writ of Summons. 3.The second major head of claim seeks injunctive relief in relation to alleged breaches of a Company Agreement set out in paragraphs (1)(c) and (d). 4.There is also a claim for an injunction in respect of certain allegations passing off: paragraph (1)(e). 5.Paragraphs (2), (3), (4), (5), (6), (7), (8) and (9) seek seven orders and one declaration which are, in effect, incidental to the claims outlined in the preceding paragraphs. Paragraphs (10) – (16) are further remedies sought by the Plaintiffs.
6.On 24 May 2016, the Plaintiffs took out an inter partes summons for an interlocutory injunction to restrain the Defendants from conduct which is, in essence, that for which the Writ of Summons was issued. The object of this application for interlocutory relief is plainly stated in the submissions on behalf of the Plaintiffs and also in the affidavit evidence: to prevent the launch in Hong Kong of the Optimera Products marketed by the Defendants which the Plaintiffs say are not authorised for sale using the “NERIUM” mark. The Plaintiffs say that such a mark is owned by Nerium Biotech and/or Nerium Skincare, both on its own as an unregistered trade mark as well as the most prominent and distinctive element of Nerium Biotech’s Registered Marks in Hong Kong. This is because the Plaintiffs say that this amounts to (1) trade mark infringement; (2) passing off in Hong Kong; and (3) is a breach of the Company Agreement. Other prayers for relief are included in the summons in relation to the application for an injunction but that gives the flavour of that component of the claim. In addition, the summons seeks an order that leave be granted to the Plaintiffs to issue a Concurrent Writ of Summons in this action against the 1st Defendant and to serve, on an expedited basis, a sealed copy of the Concurrent Writ of Summons and the inter partes summons. 7.On 27 May 2016, Deputy High Court Judge Kent Yee ordered, amongst other things, that leave be granted to the Plaintiffs to issue a Concurrent Writ of Summons in the action against the 1st Defendant on an expedited basis in the terms sought by the Plaintiffs in their summons and for service out of the jurisdiction. There were other orders made but that is for present purposes the critical order. Both counsel for the Plaintiffs and Counsel for the 2nd Defendant were heard by the learned judge in connection with the application before him. The application for the interlocutory injunction, the proceedings before me, were adjourned to 25 and 26 August 2016. 8.In the course of proceedings, counsel for the Plaintiffs indicated that items (1) c, d and e were not pursued. Nothing more need be said about these. 9.On 26 July 2016, the Defendants took out a summons to set aside the orders made by Deputy High Court Judge Kent Yee in relation to service out on the basis that:
The Defendants also sought a declaration that, in the circumstances of the case, the Court should not exercise any jurisdiction it may have over the Defendants in so far as the Plaintiffs’ cause of action against any of them is in relation to any alleged breach of the Company Agreement referred to in Paragraphs (1)(c) and (d) of the Endorsement of Claim contained in their Writ of Summons dated 5 May 2016, on the grounds as set out in Order 12, rule 8(2A)(a) and/or (c) of the Rules of the High Court.
10.A hearing of the inter partes summons for an interlocutory injunction and the summons taken out by the Defendants proceeded before me on 25 and 26 August 2016. 11.At the conclusion of the hearing on 25 and 26 August 2016, as it became increasingly obvious that the hearing could not be concluded on those days, the issue of temporary relief to abide the event of the further hearing in December arose. A form of temporary relief was crafted with the express purpose of restraining the Defendants from launching products said to be in breach of the trade mark rights of the Plaintiffs. The sole focus of that relief was what was said to be the trade mark rights of the Plaintiffs and did not address either the passing of claim or the claims in respect of the Company Agreement. The orders for temporary relief have gone through some modification since the original orders but the intention and the effect is, in substance, the same. There have been further hearings of the matter since then. 12.After those hearings, but before judgement on the applications before this court could be finalised, on 16 January 2017 a judge of the US District Court, Northern District of Texas, Dallas Division, Her Honour Judge Boyle ruled on a motion for a Preliminary Injunction on the part of the 1st and 2nd Plaintiffs in these proceedings and the 1st Defendant and another party related to the 1st Defendant wherein she denied the motion. The motion involved issues which are, in a sense, pertinent to the proceedingsin Hong Kong. Directions were given for written submissions to be filed in relation to the decision of the US District Court and a date was fixed for the hearing of oral submissions in that regard. Unfortunately, the undersigned was not available on that date and, by agreement, the matter so far as issues arising from the US decision are to be resolved based on the written submissions. As a matter of history, the 1st and 2nd Plaintiffs filed a Motion for Reconsideration before the US District Court and Her Honour Judge Boyle refused that application on 12 May 2017. FACTUAL BACKGROUND OF THE CASE 13.As these are interlocutory proceedings determined on affidavit and it is no understatement to say that not all of the relevant facts are accepted by all sides. It is not only impossible but wholly inappropriate on the basis of affidavit evidence to resolve these disputes. That, indeed, is the entire nature of the interlocutory proceedings at issue. The evidence filed in support of the claims of the parties is voluminous and detailed and it will be obvious from a reading of my attempt to summarise the case for the respective parties that I have not referred to all of that detail but only such facts and matters as I considered relevant for the resolution of the applications of the parties. The case for the Plaintiffs 14.Nerium Biotechnology, Inc, the 1st Plaintiff, claims to be an international research and development company incorporated in Canada in 2006. Since incorporation, the 1st Plaintiff has traded under and used the ”NERIUM” name and mark.[1] The 1st Plaintiff asserts that it focuses on science-based product development, and has conducted research and product development on the anti-cancer, anti-viral, immune stimulating, and dermal properties of natural botanical compounds.[2] From this activity, the 1st Plaintiffasserts that it discovered beneficial extracts and compounds derived from the Nerium Oleander plant. In this regard, the 1st Plaintiff says that it achieved this by inventing, and utilising proprietary and patented technologies and it has been able to successfully isolate and extract unique components from that plant which eliminate the toxic effects of the plant whilst preserving its beneficial properties.[3] The case for the Plaintiffs is that, following further research by the 1st Plaintiff, the results showed that the NAE-8 Compound had remarkable skincare properties and anti-ageing efficacy. The 1st Plaintiff then undertook efforts to make the NAE‑8 Compound available in the form of skincare and/or over the counter products.[4] 15.The case for the Plaintiffs says that in January 2007, the 1st Plaintiff reserved and registered a number of different domain names with “NERIUM” in the name. These included www.nerium.com.[5] Further, in 2009, Nerium SkinCare Inc — the 2nd Plaintiff — was established as a division of the 1st Plaintiff, to undertake the development, formulation, clinicaltesting, manufacturing, commercialisation, and regulatory approval of natural skin care products, including in particular products containing the NAE-8 Compound, based on the 1st Plaintiff’s research, technology, and intellectual property.[6] The 2nd Plaintiff was later incorporated in 2010 as a wholly-owned subsidiary of the 1st Plaintiff to perform the functions outlined earlier. The 2nd Plaintiff was expressly authorised by the 1st Plaintiff to use “Nerium” as part of its name.[7] Apparently, in connection with these responsibilities, in2009, the 2nd Plaintiff developed two skincare products, namely “NeriumDerm” and “NeriumCS”.[8] These products were produced, and appear to have been test marketed in 2010 and 2011 to shareholders, friends of shareholders and the market in San Antonio, Texas.[9] 16.More pertinently, the case for the Plaintiffs is that since at least 2008, the 1st Plaintiff and/or the 2nd Plaintiff have continuously used the mark “NERIUM” and other similar marks to identify and distinguish its products and services, which include cosmetic and skincare products containing the NAE-8 Compound.[10] Critically, this use is said to have occurred in Hong Kong, the United States and internationally. In this regard, the 1st Plaintiff also applied to register and has succeeded in registering marks containing the house mark “NERIUM” in Hong Kong, the US and internationally.[11] The case for the Plaintiffs is that even prior to the establishment of the 1st Defendant and the execution of the Company Agreement (of which more in a moment), the 1st Plaintiff had already applied to register the marks “NERIUM SKINCARE”, “NERIUMDERM”, “NERIUMCS”, and “NERIUMRX” amongst others in the US.[12] 17.In Hong Kong, the case for the Plaintiffs is that the 1st Plaintiff has registered the marks “NERIUMFIRM”, “NERIUMAD”, and “NERIUMRX”.[13] The 1st Plaintiff also has five pending trade mark applications in Hong Kong which contain the house mark ‘‘NERIUM’’.[14] The 2nd Plaintiff applied to register the NeriumAD mark in the United States on 12 July 2011. That was three months after the execution of the Company Agreement.[15] In support of their contention that they not only own the relevant marks but are recognised as doing so, the Plaintiffs point to an incident in 2012 where the 1st Defendant asked the 2nd Plaintiff to intervene in a complaint to Google AdWords because Google would only respond to the owner of the trade mark and not to the 1st Defendant. A further incident arose in 2014 in connection with this where the alleged misuse of Nerium on a website was referred by the 1st Defendant to the 2nd Plaintiffs.[16] 18.The case for the Plaintiffs is that following what appears to havebeen a test marketing exercise, the 1st Plaintiff started looking for other meansof marketing their products. In this regard, in early 2010, Mr Dennis Knocke, the Chairman and Chief Executive Officer of the 1st Plaintiff was introduced to Mr Jeffrey Olson who asserted that he had extensive experience with what is characterised as “multi-level marketing.”[17] The 1st Plaintiff decided to pursue the multi-level marketing approach with Mr Olson.[18] The Plaintiffs say that the 1st Defendant was formed as a Texas Limited Liability Company, in anticipation that it would act as distributor of skincare products developed by the 1st Plaintiff and/or the 2nd Plaintiff in accordance with the draft Company Agreement which had been exchanged between the parties.[19] 19.After further negotiations, the case for the Plaintiffs is that the 1st Plaintiff, the 2nd Plaintiff, Mr Olson, and JO Products, LLC (Olson’s company), entered into the Company Agreement for the governing of the 1st Defendant. The Company Agreement was dated 6 April 2011 but was effective as of 25 October 2010. Under the Company Agreement, JO Products LLC owns 70% of the 1st Defendant and the 2nd Plaintiff owns 30%.[20] 20.The case for the Plaintiffs is that the 1st Plaintiff and 2nd Plaintiff appointed the 1st Defendant to be their exclusive licensee for the sale of the Plaintiffs products which contained the Nerium Oleander substance on a worldwide basis.[21] 21.The Plaintiffs point to certain extracts from the Company Agreement. In particular, the Plaintiffs point to:
(emphasis supplied in written submissions on behalf of the Plaintiffs) 22.The case for the Plaintiffs also relies on assertions in the Product Line which is an attachment to the Company Agreement. In particular the Plaintiffs say that “all of the products included in the Product Line are stated to be ‘produced by Nerium [Skincare] and/or Nerium Biotech’.”[22] Further, the Plaintiffs point to Article 4.03 of the Agreement which contemplates the future execution of a Distribution and Licensing Agreement between the 1stDefendant and Nerium SkinCare to “…provide for the use of the intellectual property, formulation of the Product Line, the farming, the storage of the Nerium Oleander plants, the processing of the Nerium Oleander plants into biomass (powder), biomass storage, and the manufacture of the specific products that comprise the Product Line”. The Plaintiffs say that an agreement as contemplated by Article 4.03 has never been reached. What appears to be critical in this regard is the formulation of the Product Line and the use of “the intellectual property”.[23] The Plaintiffs point to Article 20.01(d) which is said to confirm that Nerium SkinCare and/or its affiliated company Nerium Biotech “own all of the intellectual property assets used on or in connection with the Product Line.”[24] 23.The case for the Plaintiffs was that under the Company Agreement:
As I understand the case for the Plaintiffs, it is not so much that it is contended that the Company Agreement creates ownership in the intellectual property in dispute in this case. The case is more that it confirms or, at minimum, does not detract ownership. 24.In essence, the case for the Plaintiffs comes to this, the intellectual property owned by the 1st and 2nd Plaintiffs:
25.The case for the Plaintiffs was that pursuant to the Company Agreement, the 1st Plaintiff/the 2nd Plaintiff decided that the first skincare product to be sold by the 1st Defendant should be branded “NeriumAD”, usingthe 1st Plaintiff/the 2nd Plaintiff’s distinctive “NERIUM” house mark with the “AD” referring to “Age-Defying”, and NeriumCS® with “CS” meaning “cold sore”.[25] The Plaintiffs say that, consistent with the rightful ownership of the intellectual property assets, the 1st Plaintiff successfully registered the “NeriumAD” mark both in the United States and in Hong Kong.[26] 26.The case for the Plaintiffs is that, at least for a while, things appeared to be going well and in accordance with the Company Agreement. In particular, the Plaintiffs refer to the launch of “NeriumAD” in the United States. The Plaintiffs case is that this product was manufactured, packaged and supplied by the 2nd Plaintiff to the 1st Defendant for marketing and distribution.[27] According to the Plaintiffs, this was how things were supposedto be done. Further products were promoted and sold in this way in the US.[28] The Plaintiffs accept that “NeriumAD” products were advertised, promoted andsold in Hong Kong via what were characterised as third-party Internet sites.[29] 27.The case for the Plaintiffs is that all did not continue going well. They say that without their knowledge or consent in 2014, the 1st Defendant developed a new line of products called “Optimera” which did not contain the Nerium Oleander substance, the NAE-8 Compound. It is to be recalled that this is the compound that the 1st Plaintiff identified and isolated and, on the basis of the Plaintiffs’ case was utterly critical to the formulation and marketing of the “Nerium” range.[30] The Plaintiffs say that they confronted the 1st Defendant and the explanation that was offered was the 1st Defendant wanted to offer for sale a product without the NAE-8 Compound which it characterised as a temporary “placeholder” in certain countries. This was said to be for the period while the 2nd Plaintiff was in the process of securing regulatory approval for the “NeriumAD” Products in those countries.[31] The Plaintiffs point to the launch of “Optimera” products in Canada and Mexico at different times in 2014.[32] The Plaintiffs make the point that the “Optimera” so launched did not bear the “Nerium” name or mark and the labelling of the packaging was different from products manufactured by the Plaintiffs. According to the Plaintiffs, this continued for some time. It is to be recalled and is significant, so the Plaintiffs say, that the “Optimera” range was not manufactured by the Plaintiffs and did not contain the NAE‑8 Compound. This was, so the Plaintiffs say, in breach of the Company Agreement. 28.In and around late 2014 and early 2015, two important things were going on. According to the Plaintiffs, the 1st Defendant informed the 2nd Plaintiff of the countries into which it wished to expand. That, so the Plaintiffs say, involved the 2nd Plaintiff in expending effort and time in obtaining relevant regulatory approval in those countries.[33] Those countries included Hong Kong. In Hong Kong, what is characterised as “legal clearance” was successfully obtained for the NeriumAD Products in October 2014.[34] In order to enable import of the NeriumAD Products into Hong Kong, the 3rdPlaintiff was incorporated as a wholly-owned subsidiary of the 1st Plaintiff in November 2014. The second thing that was going on was an attempt, so the Plaintiffs say, to resolve disputes between the 1st and 2nd Plaintiffs on the one hand and the 1st Defendant on the other hand. The focus of these disputes would appear to have concerned the continued manufacturing and distribution of the “Optimera” products.[35] The case for the Plaintiffs was that in the course of those negotiations the parties contemplated that the 1stPlaintiff/the 2nd Plaintiff would take over the manufacture of the Optimera Products.[36] Further, the case for the Plaintiffs is that the 1st Defendant stated that it wanted to re-brand the packaging of the NeriumAD Products and the Optimera Products.[37] The Plaintiffs say that the 1st Plaintiff and the 2nd Plaintiff objected to the re-branding proposal but agreed not to interfere with it while the parties continued to try to resolve their disputes. The Plaintiffs say that they were assured by the 1st Defendant that the re-brand was consistent with the goals of replacing the Optimera Products with the NeriumAD Products once the latter received international approvals and of allowing the 2ndPlaintiff to become the manufacturer of the Optimera Products so that the 2nd Plaintiff could control the quality of the product.[38] The case the Plaintiffs set out is that the packaging design of the Optimera Products and NeriumAD Products became practically identical.[39] Despite the 1st Plaintiff/the 2nd Plaintiff’s agreement to the re-branding, the Plaintiffs contend that the parties were unable to settle their dispute and the 2nd Plaintiff did not become the manufacturers of the Optimera Products. 29.Apparently, mediation proceedings were attempted. Settlement discussions were, according to the Plaintiffs, continuing but notwithstanding this, the 1st Defendant re-designed the www.nerium.com website to remove theextensive references to the 1st Plaintiff/the 2nd Plaintiff and their responsibility for developing, manufacturing, supplying and ensuring the quality of the NeriumAD Products.[40] The Plaintiffs say that the amended website misleadingly represents that the 1st Defendant is the supplier and source of NeriumAD Products, the proprietor of the patented method to extract NAE‑8 and the owner of the trade mark for “NAE‑8”.[41] 30.Obviously, the rebranding involved issues of how to use the trade marks owned by the 1st and 2nd Plaintiffs. 31.The Plaintiffs say that the assertion on the part of the Defendants about “Optimera” being a placeholder for the “NeriumAD” products was exploded in relation to the launch of the former in Korea. Regulatory approval had already been obtained for “NeriumAD” and thus there was no need, so the Plaintiffs say, for any placeholders. 32.As has already been mentioned, part of the business discussions which continued between the parties involved rebranding. The Plaintiffs’ case is that the parties contemplated that Nerium SkinCare and Nerium Biotech would manufacture both the NeriumAD products and the Optimera Products. The object of this included, according to the Plaintiffs, an anxiety that the Optimera Products be manufactured according to the standards set by the 1st and 2nd Plaintiffs. In short, the 1st and 2nd Plaintiffs would agree to the “re-branding” exercise which would involve an obvious derogation of the trade mark rights of the Plaintiffs provided they were to be the manufacturers of the Optimera Products.[42] At the time of the announcement of the re‑branding, the case for the Plaintiffs is that there had been no agreement reached as to the manufacture of the Optimera Products.[43] 33.Relations between the parties further declined and legal proceedings against the 1st Defendant, Mr Olson, and JO Products LLC were commenced in Texas.[44] Further proceedings were issued in New York.[45] Those latter proceedings were consolidated into the Texas proceedings.[46] From the legal proceedings emerged a motion for an interim injunction on the part of the Plaintiffs in relation to a variety of topics concerning issues in dispute but as will appear below, the motion was substantially narrowed by the time it came on for hearing. Prior to the motion for an injunction there was at least one earlier preliminary interlocutory skirmish initiated by the 1st Defendant and others. That has no bearing on the present proceedings, save to say that it underlines the decline in relations between the parties. 34.The essence of the claim so far as the intended launch in Hong Kong is concerned is that the use of the “Nerium” mark on the Optimera Products is an infringement of the 1st Plaintiff’s Hong Kong Registered Marks. The Plaintiffs point to advertising and promotional activities by the 1st Defendant which, so the Plaintiffs say, have the effect of falsely and misleadingly associating the Optimera Products with the “NeriumAD” products. This is said to be because of similar layouts in the promotion of the Optimera Products on the websites controlled by the 1st Defendant.[47] The same is said by the Plaintiffs to occur on YouTube[48]; Facebook[49]; and online blog posts.[50] Objection is also taken by the Plaintiffs to what they characterise as the wrongful use of the “NeriumAD” Product Line History (which outlines the history, source and development of the “Nerium” products) and which, so saythe Plaintiffs, seeks to wrongly associate or imply that Optimera Products have the same source, origin quality, efficacy or sponsorship as the “NeriumAD” products.[51] The problem of wrongful association is, so the Plaintiffs say, compounded by what are characterised as problems and complaints about the quality and standards of the Optimera Products.[52] The case for the Plaintiffs is that it is relevant background to note that further products have been marketed in North America which, so the Plaintiffs say, misleadingly use the “Nerium” trade mark owned by the Plaintiffs without their authorisation or consent.[53] The Plaintiffs also point to attempts by the 1st Defendant to register marks bearing “Nerium”, being the house name/mark of the 1st Plaintiff and the 2nd Plaintiff.[54] Further, the 1st Defendant applied to invalidate the registered mark owned by the 1st Plaintiff “NeriumAD” in Hong Kong.[55] 35.The Plaintiffs believe that the 1st Defendant intends to market and distribute Optimera Products in Hong Kong in the near future.[56] The Plaintiffs contend that it is necessary in the light of the background to the matter outlined by them and summarised above by me that it is necessary to restrain what the Plaintiffs fear will be an infringement or threatened infringement of various intellectual property rights held by the Plaintiff. Thecase for the Plaintiffs is that they seek to restrain the use by the Defendants of the intellectual property assets of the Plaintiff including the “Nerium” Marks and packaging designs of the Optimera products manufactured and sold by the Defendants. The Plaintiffs say the packaging of the Optimera is a close copy of the Plaintiffs’ packaging and is calculated to create in the minds of the public and association between the products of the Plaintiff which contain the critical, patented Nerium Oleander extract. 36.The use of the packaging design, so contend the Plaintiffs, amounts to the tort of passing off and is also a breach of the Company Agreement.[57] In this regard, the Plaintiffs contend that the association of the Optimera products with the products of the Plaintiffs and, in particular, NeriumAD, is reinforced by the manner in which those products are presented on the website of the Defendants, in YouTube and Facebook.[58] The Plaintiffs contend that the overall effect is to convey the idea that the Optimera products have the same source, origin, quality, efficacy or sponsorship as the NeriumAD products. 37.The case of the Plaintiffs is that the 1st Defendant applied for trade marks in Hong Kong and elsewhere which employed, in various ways, the “Nerium” mark which is owned by the 1st Plaintiff and 2nd Plaintiff and that such conduct is in breach of the Company Agreement.[59] The Plaintiffs had already registered in Hong Kong trade mark “NeriumAD” and Defendants sought to invalidate that. There are proceedings in relation to that dispute.[60] 38.There is no dispute that the Defendants intend to market and distribute the Optimera products in Hong Kong and the concern of the Plaintiffsis that in doing so the Defendants intend to use the intellectual property of thePlaintiffs to make it appear that the Plaintiffs are closely associated with those products. The particular concern is that products not manufactured by the Plaintiffs’ side might, if the intellectual property rights of the Plaintiffs are notprotected, suggest or imply that those products contain the critical component: the Nerium Oleander substance. 39.Despite the fact that Nerium products are only officially available in the United States, there has been advertising, promotion and sales of NeriumAD products in Hong Kong.[61] Such advertising promotion and salesoccur through third-party websites which are targeted at the Hong Kong market. These show the prices of goods available on those websites in Hong Kong dollars and they include fishpond.com.hk and eBay.com.hk.[62] There is also a “Nerium Hong Kong blog” operated by a third party and a Facebook page entitled “Nerium Hong Kong” which also appears to be operated by a third party. Both appear to be operated by what are characterised as Nerium brand partners.[63] The Plaintiffs also point to the establishment of the reputation of Nerium through Nerium.com and neriumhk.weebly.com.[64] The case for the Defendants 40.It is the Defendants’ position that the Plaintiffs have all along been aware of, consented and/or acquiesced to the marketing of Optimera Products and the Defendants deny that such consent and/or acquiescence is, in any event, necessary.[65] 41.Nerium International was incorporated on 25 October 2010 underthe laws of Texas. Nerium SkinCare, the 2nd Plaintiff, holds 30% of the shares of NI, whilst the remaining 70% of the shares are owned by JO Products LLC, a company solely owned by Jeffrey Olson.[66] The 1st Plaintiff was formed to carry out research into treatments arising from the Nerium Oleander plant. However, the company had no marketing experience.[67] The introduction to one of the principals of the 1st Plaintiff, Mr Knocke, was said to come against the background of the 1st Plaintiff being in some financial difficulty.[68] Mr Olson has a background and experience in marketing.[69] 42.The case for the Defendants is that the 1st Defendant was formed in October 2010 with the shareholding outline above.[70] The rationale for this, on the Defendants’ case, is the reliance on the expertise of Mr Olson and the costs and expenses involved in the marketing effort.[71] The intention was that Mr Olson would have sole and exclusive control of the management of the 1st Defendant and, in this regard, the Defendants point to Article 6.01 of the Company Agreement.[72] 43.The case for the Defendants is that the 1st Defendant is the only marketing channel for the Nerium products, and Nerium SkinCare is not entitled to market the Nerium products through other channels (they point toArticle 4.03 of and Exhibit C to the Company Agreement).[73] The Defendants say that this is expressly accepted by the Plaintiffs in §3 of their Skeleton Submissions filed on 23 August 2016.[74] Accordingly, the Defendants say, the 1st Defendant has been and will be the only company marketing the Nerium products in the market (including Hong Kong).[75] 44.It is accepted by the Defendants that no separate agreement has been entered into as would appear to be contemplated by Article 4.03 of the Company Agreement. Such an agreement was contemplated to cover the use of intellectual property, formulation of the Product Line, the manufacture of specific products which comprise the Product Line and other matters.[76] The Defendants assert that the explanation for this failure to come to an agreement contemplated by Article 4.03 is simply a failure to agree to the terms as opposed to the assertion on behalf of the Plaintiffs that the 1st Defendant has refused to enter into such an agreement.[77] 45.The case for the Defendants is that prior to the advent of the Company Agreement there was, at most, a very limited distribution of products by Nerium SkinCare.[78] 46.The “N” logo was developed and designed by a company engagedby the daughter of Mr Olson. The company, known as AM design, came upwith the “N” logo in early 2011. Once the design was settled, the 1st Defendantpaid for the design work.[79] The Plaintiffs did not create the NeriumAD name that they have registered in Hong Kong (and elsewhere), and they have never marketed or sold any products under that name themselves. Around April 2011, the 1st Defendant created the name “NERIUMAD” for the Product Line during internal discussions at a meeting within the 1st Defendant.[80] The Defendants say that the overall appearance of the get-up for the Product Line created and developed by the 1st Defendant is substantially different from thatused by Nerium SkinCare in respect of the old Nerium Derm. The cylindrical shaped bottle that narrows at the centre is not itself an unique or in any way distinctive form of packaging, and similar shapes of bottles can be seen being used in relation to cosmetic or skincare products of other brands from time to time.[81] Further, the Defendants say that the elements of the colour scheme, typeface, and logo for the Product Line were developed by the 1st Defendant and are totally different from the old products. The Defendants say that the initial product under the Product Line marketed by the 1st Defendant, which was launched in August 2011 was the Nerium Age Defying Night Cream, using the NeriumAD name; this was the first time this name was used on any products by anyone.[82] 47.The Defendants say that in 2014 the 1st Defendant decided to redesign the getup for all products that it distributed. To this end, the 1st Defendant hired a third-party to develop a new look for its products. The 1st Defendant decided to display its own name more prominently on all of the packaging. In this regard, the case for the Defendant is that the general public regard the 1st Defendant as the sole trade source for these products. The Defendants say that the 1st Plaintiff was not involved in the sale or marketing of the product line and had no input of an extensive nature into the packaging or marketing materials. The Defendants say that solely as a matter of courtesy comments were invited from the 1st Plaintiff as to the redesign process which was said to have taken place in 2014 and early 2015.[83] 48.The Defendants reject the assertion of the Plaintiffs that the Optimera Products are unauthorised products or “knock-offs” seeking to take advantage of the Nerium name or brand. They contend that first, NI is and was all along entitled to develop and market products other than those under the Product Line. It is the position of the Defendants that the Company Agreement does not prohibit NI from developing and marketing its own products.[84] Further, the Defendants contend that the 1st and 2nd Plaintiffs were aware of the development and marketing of the Optimera Products. The Defendants say that these products were openly marketed by the 1stDefendant and that there has been substantial promotion and advertisement in respect of these products.[85] 49.The Defendants also reject the assertion that the Optimera Products were originally intended to be “placeholder” products for the international market. The Defendants say that the1st and 2nd Plaintiffs were well aware that the reason that the 1st Defendant developed the Optimera Products was becausethe 1st Plaintiff “has failed to provide [the 1st Defendant] with a product which is internationally marketable.”[86] The Defendants say that the marketing of these products requires the availability of information in connection with “clinical results and statistics”. In effect, the Defendants say that the 1st Plaintiff has refused to provide the relevant “proprietary” information.[87] The Defendants contended that the marketing of the Optimera Products is to continue at least until Nerium SkinCare can provide the “internationally marketable” products to the 1st Defendant. While the 1st Defendant is still interested to market the new international products developed by Nerium SkinCare, the longer the delay for Nerium SkinCare in providing the 1stDefendant with the internationally marketable products, the harder it is forthe 1st Defendant to phase out the Optimera Products because of the substantial time, effort and resources the 1st Defendant has incurred on their promotion and marketing, as well as the success that the 1st Defendant says that such products have achieved so far.[88] The Defendants say the marketing of the Optimera Products has been conducted openly and the 1st and 2nd Plaintiffs have received profits arising from the sales of such products. The Defendants also assert that the products produced by the 1st and 2nd Plaintiffs have had quality control and supply problems and they have not been able to provide “adequate support for the marketing of the products both domestically and in the international market.”[89] 50.The Defendants also say that the 1st and 2nd Plaintiffs have been “intentionally overcharging” the 1st Defendant for its products. This is said to be supported by an independent audit which revealed, so the Defendants say, wrongful inflation of the cost of its products.[90] 51.The Defendants say that in 2014 and early 2015 that the 1st and 2nd Plaintiffs agreed to a rebranding exercise in which the 1st Defendant wouldrebrand all of the products, including the Optimera Products, “under the sametrade dress”. The Defendants do not accept as true the basis upon which the 1st and 2nd Plaintiffs were prepared to agree to that process. The Defendants specifically reject as untrue that it was contemplated that the 1st and 2nd Plaintiffs would be the manufacturers of the Optimera Products. This is described by the Defendants as “nothing but a lie”[91]. The Defendants’ position is that the Plaintiffs accepted the rebranding and point to a purchase order as evidence of that acceptance.[92] The Defendants say that they have never agreed to the 1st Plaintiff being the manufacturer of the Optimera Products. Further, the Defendants say that concerns expressed by the 1st and 2nd Plaintiffs over the quality of these products is unfounded. They go on to assert that indeed the 1st and 2nd Plaintiffs have had “serious problems in its quality control and in the supply of products” to the 1st Defendant. For this reason, the Defendants characterise the assertion by the 1st and 2nd Plaintiffs that they should manufacture the Optimera Products in exchange for giving up intellectual property rights as “absurd”.[93] 52.The Defendants say the reason that the 1st and 2nd Plaintiffs have not objected to the marketing of the Optimera Products by the 1st Defendant and, more pertinently, to the rebranding exercise is because: [94]
53.The Defendants reject the assertions of the Plaintiffs[95] that the phrase “Real Science Real Results” used by the 1st Defendant in its promotion of the Optimera Products would have misled members of the public into the belief that the 1st and 2nd Plaintiffs manufacture, license, sponsor, endorse or otherwise are associated or connected with the Optimera Products and, in thisregard, have the same source origin or sponsorship as the NeriumAD Products. The basis for the rejection of that contention, so say the Defendants, is that the phrase “Real Science Real Results” was developed by the 1st Defendant. 54.In relation to the issue of trade marks, the Defendants say that at the time of the execution of the Company Agreement, neither party had filed any trade mark applications for the NeriumAD Products or the like in the US or elsewhere.[96] The Defendants say that they have a Registered Mark in respect of the “N” logo in classes 3 and 35. The date of registration was 20 August 2014 and the registered number is 303108492.[97] The Defendants outline other applications for trade mark registration pending in Hong Kong. The position of the Defendants is that the 1st Defendant has been the only entityresponsible for marketing the various Nerium products in the market, and theonly entity to have used commercially anywhere in the world the Nerium mark or name (or any mark or name containing that word), the “N” logo device, thename “Nerium International, LLC”, and the phrase “The Nerium Experience”. Neither Nerium Biotech nor Nerium SkinCare has used any of those commercially for any products (or any name or mark containing the word “Nerium” or any of its marks registered in Hong Kong or the United States or anywhere else), in the sense that neither of them used any of those marks or devices to seek to create a market anywhere in the world for any products with any of such names, marks or devices as an indicator of the trade origin or connection of those goods with or from any of them. They say that as the public recognises the 1st Defendant as the trade source of the relevant products, or as the company responsible for the products, the 1st Defendant is clearly entitled to register the marks as owner.[98] The conclusion that the Defendantssay follows from this is that the 1st Plaintiff should not be entitled to claim as proprietor of those marks, and that is one of the bases on which 1st Defendant applies to invalidate the earlier registrations of Nerium Biotech.[99] 55.The Defendants say that there is clearly no reasonable likelihood of confusion as the marks or signs used by the 1st Defendant in question, especially the “N” logo device, are completely different from those registered. Moreover, the 1st Defendant’s products inevitably bear the prominent and distinctive “N” device and the company name of the 1st. In so far as the 1stDefendantis using the name “Nerium” or “Nerium International” or “Nerium International, LLC” and Nerium Biotech is complaining of that, the Defendants contend that the 1st Defendant is merely only using its own name to conduct business according to Article 2.02 of the Company Agreement. Signatories to the Company Agreement, namely Products LLC and Mr Olsen, being the shareholders and sole Manager of the 1st Defendant, are bound to conduct its business in that name.[100] 56.In any event, the 1st Defendant contends that it has been and shouldbe the only marketing channel for the Nerium products, and Nerium SkinCare is not entitled to market the Nerium products through other channels. So, the case for the Defendants is that the marketing of the Optimera Products would not have affected or caused any damage to Nerium SkinCare which cannot be compensated by way of damages.[101] 57.The Defendants say that the Plaintiffs have never marketed Nerium products or sold in Hong Kong.[102] The Plaintiffs have no business operation in Hong Kong.[103] No sales have been undertaken by the Defendants in Hong Kong and none have been authorised.[104] Further, the Defendants have been unable to uncover any evidence of sales in Hong Kong by the Plaintiffs and there is no evidence that any of the third party websites have actually sold any products to members of the public in Hong Kong.[105] In relation to the Facebook site the Defendants make the point that the latest post on that site was 10 October 2015 where it identifies the only places where Nerium products are available and that list does not include Hong Kong.[106] LITIGATION IN THE UNITED STATES 58.At the same time as there existed proceedings in Hong Kong, there existed civil proceedings in the United States between the parties. The identity of those who brought the United States proceedings and were respondents to them are not precisely the same as they are in the present proceedings but, with appropriate allowances, they are the same parties. For present purposes, the Plaintiffs in those proceedings are the plaintiffs in the present proceedings before the High Court of Hong Kong. (There are, of course, differences but, for present purposes, they matter not.) In essence,it is Nerium Skincare Inc v Nerium International, LLC. Rather than describe the parties in the United States proceedings as the plaintiff and the defendant I will use Nerium Skincare Inc and Nerium International, LLC as, hopefully, the least non-confusing description of the relevant parties. 59.The US litigation is relevant for two reasons. The first is that acore proposition of the defendants in the Hong Kong proceedings is to contend that disputes in those proceedings ought more naturally to be resolved in the US proceedings. Secondly, there were proceedings in United States whereinthe plaintiffs (using the generic reference in the preceding paragraph) filed amotion for a Preliminary injunction. It is contended that the outcome of that motion underlines why the matter should be dealt with in the United States. Further, it is suggested that to the extent that there are any findings in the decision which followed the motion, that they should be taken into account if it is to be determined that it is appropriate conduct any or all components of the Hong Kong proceedings in the courts of Hong Kong. Motion for Preliminary Injunction 60.Nerium Skincare Inc filed a Motion for a Preliminary Injunction before the United States District Court Northern District of Texas, Dallas Division. On 16 January 2017, Her Honour Judge Boyle, a United States District Judge denied that motion. In so doing, she gave full and, if I may say so with respect, clear reasons for her decision. 61.In very broad terms, in her recitation of the factual background of the case, Judge Boyle recited what are the fundamental disputes between the parties without dealing with the particular disputes germane to Hong Kong. One of the critical aspects of Judge Boyle’s recitation of the facts concerns the episode which involved the issue of rebranding. In the judgement of Judge Boyle, she observes “at least initially, Plaintiffs appear to have gone along with this rebranding so that a consistent look would be present between the Nerium Products and Optimera Products.” Her Honour also recited the position of the Nerium Skincare Inc side which was that the agreement was upon the basis of an understanding that they would become the manufacturer of Optimera products and that the sales of Optimera would cease once regulatory approval for the Nerium was obtained. The Judge noted the disagreement of the parties in relation to this issue and notes that mediation was undertaken which was unsuccessful. The facts, as recited by Her Honour, leave that issue at that point. 62.Judge Boyle then proceeded to recite the procedural history of the matter and how the dispute came to be before the court of which she was a member. The upshot of that recital was that the procedural situation left the court with a dispute in which the court was asked for injunctive relief on behalf of Nerium Skincare Inc. The basis of that was underlying claims fortrade mark and trade dress infringement and breach of the Company Agreement. 63.The judgement then recites the legal principles upon which it is founded as follows:[107]
64.One of the issues that Judge Boyle had to deal with was the scope of the injunction sought by Nerium Skincare Inc. The upshot of this was that the Judge observed: “Therefore, for the purposes of this opinion, the Court need only address the Plaintiffs’ arguments as they relate to Plaintiffs’ registered trade mark and the ‘N’ mark, which as noted above is registered to[the Defendants].” Her Honour noted that unlike the majority of trade mark disputes the issue in the case before her turned on whether Nerium Skincare Inc had established what she characterised as “protectable rights” in the claimed marks. She identified two issues for consideration in this regard: (1) the “protectability” of the trade mark rights in question and (2) the ownership of the marks. She held that Nerium Skincare Inc had failed to establish a substantial likelihood of success on part (1) of the issues before her and therefore it was not necessary to consider part (2) of those issues. 65.Judge Boyle characterised the case for Nerium Skincare Inc as something of a “moving target”. She approached the matter upon the basis that the position of that party was that the registered trade marks owned by them were violated by the use of “Nerium International” as a trade mark on the Optimera. As Her Honour noted, “Based on this group of registrations, Plaintiffs’ registered trade marks generally fall into two categories: (1) trade marks identifying products or entities existing before the relationship with NI began—NeriumDerm, NeriumCS and Nerium SkinCare; and (2) trade marks associated with products developed as a result of the relationship with NI—NeriumAD and NeriumFirm”. Her Honour then considered the two categories. As to the first category, she considered that the starting point was that registration of a trade mark is prima facie evidence of the mark’s validity and ownership. That, Her Honour considered meant that Nerium Skincare Inc enjoyed “a presumption of validity and ownership regarding these marks.” However, what appears to have been required is for Nerium Skincare Inc to demonstrate continuing commercial use of the registered marks. In the context of her consideration of the trade marks in category (2) she cited authority that “ownership of trade marks is established by use not by registration.” For this proposition she cited Union Nat’l Bank of Tex. Laredo, Tex. v Union Nat’l Bank of Tex Austin, Tex (1990). This appears to underlie the Judge’s analysis of the trade marks in category (1). Her Honour held that it had not demonstrated the continuous commercial utilisation envisaged by the law of the United States on which an early minimal use may hold trade mark protection. Judge Boyle concluded in relation to category (1) of the claims: “Therefore, based on this record, the Court does not find that Plaintiffs have established a substantial likelihood of success on the first element of their trade mark infringement claim as it relates to—NeriumDerm, NeriumCS and Nerium SkinCare.” 66.In relation to the category (2), that is, claims in relation to NeriumAD and NeriumFirm, different issues arose. However the starting point was the same in the sense that the Judge made the point that Nerium Skincare Inc registered the NeriumAD and NeriumFirm marks and are thus entitled to a presumption of the validity of ownership of the marks. The issue was whether that presumption was rebutted. Her Honour noted that there was a dispute between the parties as manufacturer and distributor over the use of and rights to these trade marks. Judge Boyle and examined US authority as to how competing claims between manufacturer and distributor as to the rights to a trade mark might be resolved. The principles that she applied in this regard are:
67.In this regard, the Judge recited the competing claims that the party said in relation to the Company Agreement entered into between them. In resolving those issues for the purpose of a preliminary injunction, the Judge held that the Court was not persuaded that the language of the Company Agreement assigns Plaintiffs the expansive trade mark rights they now claim over trade marks not in existence at the time the Company Agreement was executed, such as the NeriumAD and NeriumFirm marks. In the result, the Court held that no likelihood of success with regard to the element of ownership in relation to the trade mark claims in respect of NeriumAD and NeriumFirm had been established. 68.As to the “N” mark, the Court held that as this had been registered by Nerium International and it was for Nerium Skincare Inc to rebut the presumption in accordance with the principles outlined in the foregoing paragraphs. Her Honour held that no substantial likelihood of success on the merits was demonstrated in relation to this trade mark. 69.In her conclusion, Judge Boyle made it plain that her only consideration in the case involved whether or not there was substantial shall likelihood of success on the merits with the first element of the claim, that is, the “protectability” of the trade marks in question. She explicitly held that she did not consider it necessary to reach other aspects of the claim. On this basis, she denied the motion for a preliminary injunction. Motion for reconsideration 70.Nerium Skincare Inc then filed a Motion for Reconsideration of the order of Judge Boyle. On 12 May 2017, Her Honour denied that motion. In giving her ruling, Judge Boyle recites the exceptional nature of proceedings which might justify a reconsideration but, in the end, it seems to me that her judgement on the Motion for Reconsideration rests on re-stating that on the criteria for the grant of a preliminary injunction under the relevant law of the United States which had founded her decision to deny the Motion for a Preliminary Injunction that she was “unpersuaded” to change her view. Impact of denial of Motion for Preliminary Injunction
71.The plaintiffs argue that the principles and approach to the grant of a preliminary injunction is “entirely different” to the law on interlocutory injunctions in Hong Kong.[108] In this regard, they cite from the judgement of the US District Court the propositions that such a remedy is an extraordinary form of equitable relief and treated is the exception rather than the rule. The plaintiffs also point to the requirement under US law evidenced by the judgement of the US District Court that there must be a substantial likelihood of success on the merits and a substantial threat of irreparable injury if the injunction is not granted. 72.The plaintiffs also contend that the US proceedings were only concerned with the US trade mark registrations of the plaintiffs. From this, it is contended that the US court did not determine or grant any relief in relation to the trade marks of the plaintiffs or the claim in passing off on behalf of the plaintiffs. It is also contended that decision by the US District Court as to the use of the “N” device is not relevant for present purposes.[109] 73.The plaintiffs also argue that the sole question that the US District Court addressed in relation to the Company Agreement was whether Article 20.01 had the effect of assigning to the plaintiffs in those proceedings the ownership of the trade marks affixed to “Nerium Products”.[110] The consequence of this, so argued the plaintiffs, is that ruling by the US District Court as to the construction of Article 20.01 of the Company Agreement is of no assistance in determining the issues falling for decision in the Hong Kong proceedings. 74.The plaintiffs argue that the issue of whether the claim in Hong Kong in relation to the alleged trade mark infringement by the defendants is not dependent on the wording of the Company Agreement.[111] It is argued that there is no question that the 1st Plaintiff in the present proceedings is the owner of valid and subsisting Hong Kong trade mark registrations for “NREIUMFIRM”, “NERIUMAD” and “NERIUMRX”.[112] It is accepted that there is extant invalidation proceedings on behalf of the defendants in the Hong Kong Trade Marks Registry in relation to “NERIUMAD” but that has not been determined and, as a consequence of that, that trade mark remains registered by and is owned by the 1st Plaintiff. 75.The plaintiffs argue that in relation to the defences to the Hong Kong trade mark claim are not affected by the decision by the US District Court. In particular, the plaintiffs argue that the defence of consent depends on Article 2.02 of the Company Agreement which was not touched upon in the judgement of Her Honour Judge Boyle.[113] Equally, the “own name defence” is also based on Article 2.02 and accordingly, the plaintiffs submit, US District Court decision has no bearing upon that.[114] 76.The plaintiffs make the point that the notion of public perception in the US market has no relevance to the trade mark claim in Hong Kong.[115] 77.In relation to the passing off claim, the plaintiffs make the point that such a claim is “inherently territorial in nature” and therefore is to be decided by reference to Hong Kong law and by reference to the circumstances which obtain in Hong Kong and the perceived risk of deception in the Hong Kong market. It follows, so contend the plaintiffs, that the US District Court case can have no effect and that the issue of passing off in respect of Hong Kong was not an issue raised before that court in any event.[116] The plaintiffs contend that on no account does the ownership of goodwill in Hong Kong depend on the Company Agreement.[117] 78.It is contended by the plaintiffs that, in the result, the decision of the US District Court was narrow in scope and did not address any issue of whether or not the Company Agreement and, in particular, Article 20.01 of that Agreement have been breached.
79.The Defendants submit that the judgement is highly relevant to the decision that this court must make.[118] In making that submission it is accepted by the Defendants that the judgement of the US District Court is not binding on this court.[119] However, the defendants make the point that this court should take into account the construction of the District Court as to Clause 20.01 of the Company Agreement.[120] 80.The Defendants submit that the judgement of the US District Court diminishes the case for the Plaintiffs when it is asserted by the Plaintiffs that they have a strong case and the US judgement diminishes the assertion that this court could come to a clear view of the merits of the Plaintiff’s claim.[121] In this connection, they say that the impact of the judgement in the US District Court is such as to refute the assertion of the plaintiffs as to the lack of necessity for fortification.[122] It is further contended by the Defendants that the US District Court judgement erodes the contention of the plaintiffs that the defendants have no arguable defence to the trade mark claim.[123] It is also contended that this judgement also affects analysis of the balance of convenience in relation to the issue of ownership as it is affected by clause 20.01 of the Company Agreement.[124] In this regard, the defendants argue that it is important to examine the overall effect of the order of the US District Court. It is contended that the refusal to grant the worldwide injunction has the result that “the Optimera Products will be and continue to be freely available in all other countries.”[125] The defendants contend that such products would be freely available from the Internet. 81.The Defendants argue that in relation to clause 20.01 of the Company Agreement the fact that the threshold for granting a Preliminary Injunction might be higher in the United States than it is here does not diminish the merits of the argument.[126] The defendants argue that the effect of the judgement of the US District Court is substantially wider than that. It is contended that the decision of the US District Court is a clear demonstration of the dangers of the risk of inconsistent judgements on matters of contract which are disputed. In this regard, the defendants argue that this is wider in its scope than merely reference to clause 20.01 but also has impact on the approach of the court to Clause 2 .02 and 2.05. The defendants submit that this reinforces the proposition that all of this is better left to the Texan Court.[127] 82.In relation to the “N” device, the defendants submit that while the temporary order which is extant at the moment does not include orders in relation to this logo (because the plaintiffs did not seek orders in that regard), the plaintiffs have not indicated that they would not seek to restrain defendants from using the “N” device in relation to the injunction applicationpresently before this court. They say that what was said about the “N” device in the US District Court ought to be highly persuasive in the determination of the present application.[128] In this regard, in a footnote to the submissions of the defendants, it is pointed out that the original Motion before the US District Court was considerably wider in scope. Indeed, it has already been noted that Judge Boyle had noted the narrowing of the Motion before that court and ruled on the basis of a motion which was substantially narrower in scope.[129] 83.Part C of the defendant’s submissions make further submissions in relation to the construction of Clause 20.02. The defendants make the point that the contention of the plaintiffs in relation to Clause 20.01 failed before the US District Court. The defendants contended that construction of that clause is a highly pertinent issue in the proceedings before the courts of Hong Kong.[130] The defendants described the decision of the US courts in this regard as having expressed a firm view on the construction.[131] Similarly, it is contended that this is also relevant to the issue of whether the plaintiff should be the owner of the goodwill involved in this matter.[132] In relation to the issue of what evidence was placed before this Court compared with the evidence which was placed before the US District Court (which is relevant to the argument about which court is best placed to make a determination about the matter of goodwill), the defendants contended that not only there is no evidence that the materials were deficient before the US District Court but rather there was extensive cross-examination in the US proceedings and a transcript of the pertinent parts of that transcript are next to the defendants’ submissions.[133] In this regard, the contention is therefore that that material is more likely to be more comprehensive before the US Court than the Hong Kong court. While the defendant notes the argument of the plaintiff that the defendants acknowledge and admit the ownership of the relevant trade marks in the materials before the US District Court, the defendants say that this proposition is denied. 84.In relation to the issue of the passing off claim, one of the propositions relied on by the plaintiffs turns on the issue of what is characterised as public perception not so much as to what happened in Hong Kong but rather what happened in the United States. The defendants argue that to the extent that public perception of what happened in the United States is relevant to the present proceedings the US District Court’s view on that matter is relevant.[134] 85.The defendants argue in relation to the summons for discharge that the plaintiffs have misunderstood or mis-characterised what is being sought by the defendants. They make the point that the summons is simply focused on an application to set aside leave already granted to serve out of the jurisdiction and a declaration that this Court should not exercise its jurisdiction over the defendants in this case in relation to some of the causes of action on the basis that Hong Kong is not the appropriate forum for trial and that the United States is a more appropriate forum in all the circumstances. That said, it is recognised that the practical effect of a ruling that the leave to serve out of the jurisdiction be set aside would be to have the practical effect of dismissal of the Hong Kong action. In other words, the defendants recognise that the practical effect of the application to set aside leave to serve out of the jurisdiction would have the same effect as a summons for dismissal. Overview 86.The decision of Her Honour Judge Boyle in the United States is deliberately narrow in scope. It appears to apply aspects of procedure germane to US injunctive proceedings and also aspects of the law of intellectual property in that jurisdiction which appear, in some respects, to be different to how injunctive litigation is carried on in Hong Kong and in respect of substantive matters which are germane to the Hong Kong litigation this case. I propose to proceed upon the assumption that the decision correctly applies the law both as to procedure and as to intellectual property. That is not meant to be disrespectful to the judgement of Her Honour but rather a statement of practicality for the purposes of the decision in Hong Kong given that neither party chose (no criticism is implied) to lead any evidence of United States law as to the relevant procedure or as to the relevant substantive law because proof of foreign law and procedure is ordinarily an issue of evidence. 87.On the premises outlined in the preceding paragraph, what is immediately apparent is that the circumstances in which a preliminary injunction might be granted in the United States appears to be more stringent than the tests for the grant of an injunction in this jurisdiction. That said, it appears to me that there are dangers in exaggerating those differences. In the end, the jurisdiction is an equitable one and, in my judgement, it is safe to judicially notice the common roots of the law of equity in this jurisdiction with that in the United States. In short, the ultimate aim is, allowing for the procedural shortcomings of injunctive relief, the doing of justice between the parties prior to a proper trial of the issues pleaded and joined between the parties. 88.What is more striking is the difference between how rights to a trade mark operate as between this jurisdiction and that of the United States. In Hong Kong, the critical issue vesting trade mark rights is the registration. In the United States, registration is merely the start of the debate as to the vesting of rights. Certainly, non-use in Hong Kong could also result in loss of trade mark rights. The means by which those rights might be lost appears to be significantly different: section 55 of the Trade Marks Ordinance. 89.In this regard, against the background of the way in which rights appear to subsist in a trade mark registered by a party and how those rights might change under US law, the issue of Clause 20.02 of the Company Agreement might well be more significant in the way in which rights might be preserved by the party registering the trade mark which are of no significance in Hong Kong—at least until section 52 of the Trade Marks Ordinance begins to have effect in relation to the marks in question in this case. However, the striking thing about Judge Boyle’s observations in relation to Clause 20.02 of the company agreement is that her expression of opinion is intentionally a preliminary one. She makes the point that extrinsic evidence might well change the preliminary view she has formed. In my judgement, Her Honour appears to avoid coming to a concluded view about the construction of Clause 20.01. That said, reading between the lines it is not difficult to discern Her Honour’s preliminary and provisional views about the matter and it is fair to say that the plaintiffs have some work to do on the construction of that Clause in order to finally dispose the judge to the plaintiff’s position. Further, she expressed no view on the other clauses in the Company Agreement which are conceivably more germane to the resolution of issues of the “own name” defence and the issue of consent which are at the heart of the issues for consideration in Hong Kong. What Her Honour’s decision did reinforce in my mind was that it is both desirable and expedient for claims in relation to breaches of the Company Agreement be resolved in the United States. Her reference to the prospect of extrinsic evidence and related matters place that issue as one for the US courts to decide. 90.In my judgement, the decision of Judge Boyle turns more on the inability of Nerium Skincare Inc to establish its actual rights to the relevant trade marks. (This is in clear contrast the issues in the Hong Kong proceedings.) The trade marks at issue were trade marks registered in the United States and, accordingly, do not touch on the Hong Kong-registered trade marks which other subject of the Hong Kong proceedings. There is no determination in Her Honour’s decision as to whether there has been an infringement of the trade mark because, as the Judge observed, given that the motion fell down on the “protectability” of that which had been registered, the issue of breach did not arise for consideration. RELEVANT PRINCIPLES Introduction 91.I propose to outline the relevant principles in relation to the grant of an interlocutory injunction in relation to trade marks and passing off and then to apply the law to the factual issues which arise at this stage of the proceedings.
92.The modern principles governing the grant of an interlocutory injunction are derived from the American Cyanamid decision.[135] That decision was, in its time, perceived as something of a sea change in determining what principles apply in determining whether or not to grant an interlocutory injunction. That there have been a multitude of decisions explaining (and, in some respects, refining) those principles is a modest understatement. The American Cyanamid decision recognises:
The phrase “the balance of convenience” has been recognised by subsequent authority as perhaps not perfectly apt for the interim resolution of competing rights, with sometimes huge economic consequences. In NWL Ltd v Woods, the House of Lords recognised that what a court was required to do in this situation was balance the risk of doing an injustice.[136] In Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041, it was held that:
The focus, so it seems to me, of these two authorities is to recognise the risks and potential consequences of an attempt to do justice on evidence which has not been the subject of scrutiny at trial and may be, of necessity, incomplete. As the court observed in Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I (above), this is the fundamental principle. 93.In determining whether there is a serious issue to be tried, there must, of necessity, be some evaluation of the strength of the competing factual claims of the parties. While the authorities plainly recognise the difficulty in resolving such competing claims, the message of the authorities, so it seems to me, is that in the process of doing justice or avoiding injustice, the critical faculties of a court as to the competing factual claims must be firmly and clearly operating. The test is and remains whether there is a serious issue to be tried. The Plaintiffs contend, citing Hengshi InternationalInvestments Limited v Bayspring International Ltd & Anor HCMP 1916/2015, 18 December 2015, that in determining whether there is a serious issue to be tried, it is irrelevant whether the court thinks that the Plaintiff’s chances of success in establishing liability are 90% or 20%. This derives from a judgment of the English Court of Appeal in Alfred Dunhill Ltd v Sunoptic SA[1979] FSR 337, 373 (judgment of Megaw LJ). The assertion of Megaw LJ sounds counter-intuitive to me and it is, in my judgment, significant that Au‑Yeung J in Hengshi International Investments Limited v Bayspring International Ltd & Anor (above) cited in the very next paragraph in which she referred to these observations, the judgment of Ma J (as he then was) in Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I (above) which seems to me to be far safer ground for any analysis of this issue. 94.The Plaintiffs have to establish that, in the absence of an appropriate injunction against the Defendants, the Plaintiffs would suffer irreparable harm which could not be adequately compensated in damages recoverable in the action. In the decision of the English Court of Appeal in Fellowes & Son v Fisher [1976] QB 122, Browne LJ observed that the governing principle is that the court should first consider whether, if the Plaintiff succeeds at trial, he would be adequately compensated by damages for any loss caused by the refusal to grant an interlocutory injunction:
Relevantly, Browne LJ later observed in Fellowes & Son v Fisher (above):
95.Relevant to the issue of whether there has been irreparable harm is the issue of delay in issuing proceedings. Equitable relief needs to be sought promptly. The Defendants submit that there has traditionally been a strong requirement when interlocutory injunctions have been sought, that the Plaintiff must show that it has acted promptly and without delay. The Defendants submit, based on the observations of Rogers VP in King Fung Vacuum Ltd v Toto Toys Ltd [2006] 2 HKLRD 785 at §20 that “promptly” inthe circumstances of interlocutory injunctions has been commonly understood to be a period of six weeks or so of unexplained delay and three months with an explanation given for the delay in making application for an injunction. In this regard, the Defendants cite King Fung Vacuum Ltd v Toto Toys Ltd(above) at §20 and Dorshare Ltd v Shun Pong Ltd HCA 1823/2012, §§13 – 16. The learned editors of Hong Kong Civil Procedure 2017 §29/1/31 criticise the observations of Rogers VP when they observe:
The editors continue, speaking more generally:
96.In Dorshare Ltd v Shun Pong Ltd (above), Anthony Chan J explained that that there are four reasons why delay can be fatal to an application for an interlocutory injunction.[138] These were:
97.Also of significance are the observations of Sakhrani J in Abbot GmbH & Co KG v Pharmareg Consulting Co Ltd [2009] 3 HKLRD 524, which, together with King Fung Vacuum Ltd v Toto Toys Ltd(above) stand for the proposition that delay is a relevant factor which must be seen against the context of the dealings between the parties which led up to the institution of the proceedings. In Abbot GmbH & Co KG v Pharmareg Consulting Co Ltd, there were issues of whether the Defendant in that action was prejudiced in its position or had in any way altered its position because of the delay. In the result, Sakhrani J [140] adopted the observations of Eichelbaum J (as he then was) in Monsanto Co v Stauffer Chemical Co [1984] FSR 559, 571 – 572:
Sakhrani J concluded that the relevant test was whether the delay complainedof had made it unjust to grant the interlocutory injunction. That, so it seems to me, is a far more sensible and context-specific test than that which is implicitly propounded by the Defendants which appears to lay emphasis on specific time period. Plainly, delay is relevant to the issue of irreparable damage. It must not be forgotten that in this context, the focus of the rules of equity is the doing of justice. The observations of Sakhrani J inspired by Eichelbaum J best reflect that fundamental principle. Trade marks 98.Section 14(1) of the Trade Marks Ordinance, Cap 559 provides that “the owner of a registered trade mark has exclusive rights in the trade mark which are infringed by use of the trade mark in Hong Kong without his consent.” Section 14(2) provides that the “acts constituting infringement of a registered trade mark, if done without the consent of the owner, are specified in section 18 but [the acts of infringement] are subject to exceptions.” Relevant to the principles to be applied in this case is the proposition in Kerly’s Law of Trade Marks and Trade Names 15th edition, where, at §2‑003, the editors observe:
Further, the editors of Kerly’s refer to L’Oréal v Bellure [2010] RPC 1 and, in this regard, the editors observe that the Court of Justice of the European Union gave a non-exhaustive list of the functions of a trade mark, at least one of which must be liable to be affected by the use of a sign if there is to be a finding of infringement.[141] The Court is quoted as saying:
99.There is an issue of consent in this case. The issue of consent in the instant case is highly fact-specific and it is sufficient for present purposes simply to recognise the relevance of consent. I will return to this in a moment. 100.Under section 18(3):
The effect of this provision is that three facts must be shown. These are:
101.The concept of what constitutes a likelihood of confusion on the part of the public was discussed by the Court of Final Appeal in Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (No 2) (2016) 19 HKCFAR 20. There, Gummow NPJ held that “while a mere possibility of confusion is not enough, it is sufficient if the result of use by the Defendant of the sign in question will be that a number of ordinary persons will entertain a reasonable doubt and be caused to wonder whether it might not be the case that the goods or services in respect of which the Defendant’s sign is used have the same provenance as those in respect of which the trade mark is used.”[142] Gummow NPJ added:
102.The principles to be applied in the application of section 18(3) were authoritatively determined in Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (No 2) (above). In that case, the Court of Final Appeal held that those principles were that the court looked to: [143]
103.The first of the three requirements under section 18(3) is simply not in issue. The marks are found on identical or similar goods or services used in trade or business. The second requirement that there is a similarity between the registered mark and the sign alleged to be infringed requires, according to Kerly’s Law of Trade Marks and Trade Names (15th edition)[144] an evaluation of the visual, aural and conceptual similarity of the marks in question, including the overall impression given by the marks and, bearing in mind, in particular, their respective distinctive and dominant components. Given the submission of the Plaintiffs is that what is at stake in the instant case is a family of marks, there is authority for the proposition that the existence of a family of marks is capable of reinforcing each other and gaining a broader scope of protection than each individual mark might have.[145] 104.As to the requirement that it be established that there is a likelihood of confusion on the part of the public under section 18(3) of the Ordinance, Kerly’s Law of Trade Marks and Trade Names (15th edition)[146] suggests that this should be assessed globally to take into account all relevant factors including:
This is consistent with section 7(2) of the Ordinance which provides that in considering the likelihood of confusion all factors relevant to the circumstances including whether the use is likely to be associated with a registered trade mark should be taken into account. 105.In Specsavers International Healthcare Ltd v ASDA Stores Ltd[2012] FSR 19, the English Court of Appeal held that what has to be consideredin assessing the likelihood of confusion from the use of a sign:
106.Confusion might be direct or indirect: Guccio Gucci v Gucci [2009] 5 HKLRD 28, 59. Plainly, direct confusion might occur when the public confuses the sign on the mark in question. Indirect confusion arises where the public makes a connection between the proprietors of the sign and those of the mark and confuse them.[148] 107.The Defendants contend that the provisions of section 19(3) of the Ordinance are relevant to the determination of the issues in this case. This is on the basis that the matters outlined in connection with section 18 are established.[149] Section 19(3) provides:
108.The Defendants submit that section 19(3) provides that a registered trade mark is not infringed by the use by a person of his own name provided that the use is in accordance with honest practices in industrial or commercialmatters.[150] Much of the law on this topic grew up around a previous iteration of the statutory provision for trade marks,[151] so the authorities on what is sometimes called the “own name defence” go back to earlier enactments. In Parker-Knoll Ltd v Knoll International Ltd [1962] RPC 265, 275, Lord Denning,delivering the leading speech in the House of Lords observed that the legislature:
This passage was followed in Richemont International SA v Da Vinci Collections(HK) Ltd HCA 204/2006 where Deputy Judge L Chan (as he then was) held that the own name defence is very narrow and is only available for use of the Defendant’s full name subject to the proviso of honest practices.[152] He held, following NAD Electronics Inc v NAD Computer Systems Ltd [1997] FSR 380, that in the context of a corporate name the own name defence would operate, in the context of the NAD Electronics case provided the Defendant used NAD Computer Systems (the “Ltd” being of no moment) and not simply NAD. 109.This matter was also considered in the English Court of Appeal in Asprey and Garrard Ltd v WRA (Guns) Ltd [2002] FSR 31. The Court of Appeal appears to have considered this a somewhat obvious case because the trade name that the Defendant wanted to use was William R Asprey, Esquire and the actual name of the company was WRA (Guns) Ltd. However, the Court of Appeal went on to observe[153] that:
110.Perhaps more relevantly for present purposes, the honest practicescomponent of the defence falls for consideration. In this context, the concept of honest practices constitutes in substance the expression of a duty to act fairly in relation to the legitimate interests of the trade mark owner. If the mark is used in a manner such as to give the impression that there is a commercial connection between the third party and the trade mark owner, or affects the value of the trade mark by taking unfair advantage of its distinctive character and repute the defence is not made out: Gillette Co v LA-Laboratories Ltd[2005] 2 CMLR 62 cited in Gucci v Gucci (above).[154] Also relevant to this point is the observation of Deputy Judge Wong SC in Gucci when he says:[155]
Passing off 111.The basic principles require proof of a goodwill in a business in the supply of goods (or services) distinguished by a name or mark that has been or likely will be damaged by the conduct of another and such conduct ismisleading or deceptive the public. This principle is restated by the Court of Final Appeal in Re Ping An Securities Ltd (2009) 12 HKCFAR 808. There, the Court followed Reckitt & Colman Products Ltd v Borden Inc [1990] RPC 341. In particular, Gault NPJ giving the judgment of the Court of Final Appeal cited[156] with approval the speech[157] of Lord Oliver in Reckitt & Colman as follows:
112.In relation to the first element, goodwill, it is well established that this represents “in connection with any business or business product, the value of the attraction to the customers which the name and reputation possesses.”[158] The goodwill must be significant as opposed to trivial.[159] It is not necessary to show that the person who asserts loss of goodwill is known to his or her customers. Walker J in United Biscuits (UK) Ltd v Asda Stores Ltd [1997] RPC 513, 533 held that it is sufficient that the customer knew that there was such a person and care that the goods which he bought were made by that person. Where a distinctive name or mark is licensed and that name or mark is one in which the licensor has goodwill, the business carried on by the licensee using that name or mark will accrue to the licensor rather than the licensee.[160] It is not necessary to demonstrate that the party owning the goodwill in the name or mark has a presence in a particular marketas long as it is demonstrated that the owner has actual customers and a businesswithin that market.[161] In the context of an interlocutory injunction, if business has not commenced but is about to commence it is sufficient for an applicant for such an injunction to demonstrate that a demand has been created by advertising and it is not necessary in that context demonstrate actual trading.[162] In Kabushiki Kaisha Yakult Honsha & Ors v Yakudo Group Holdings Ltd & Anor [2002] 3 HKLRD 595 there is some recognition that even if a Plaintiff who has recognised international goodwill that it is not necessary to establish a separate goodwill in Hong Kong.[163] However, Deputy Judge Lam (as he then was) indicated that it was unnecessary to express a concluded view on this topic and he simply thought that the point was arguable.[164] The issue was considered in Starbucks (HK) Ltd v British Sky Broadcasting Group (No 2) [2015] 1 WLR 2628. In that case, Lord Neuberger for the Supreme Court held: [165]
A little later on, Lord Neuberger observed: “ As to what amounts to a sufficient business to amount to goodwill, it seems clear that mere reputation is not enough, as the cases cited inparas 21–26 and 32–36 above establish. The claimant must show that it has a significant goodwill, in the form of customers, in the jurisdiction, but it is not necessary that the claimant actually has an establishment or office in this country. In order to establish goodwill, the claimant must have customers within the jurisdiction, as opposed to people in the jurisdiction who happen to be customerselsewhere. Thus, where the claimant’s business is carried on abroad, it is not enough for a claimant to show that there are people in this jurisdiction who happen to be its customers when they are abroad. However, it could be enough if the claimant could show that there were people in this jurisdiction who, by booking with, or purchasing from, an entity in this country, obtained the right to receive the claimant’s service abroad. And, in such a case, the entity need notbe a part or branch of the claimant: it can be someone acting for or on behalf of the claimant.” Lord Neuberger expressed the view that a correct summary of the position is to be seen in Wadlow, The Law of Passing-off: Unfair Competition by Misrepresentation, 4th ed (2011), para 3-131 as follows:
113.There are other Hong Kong cases on this area. See: Intellectual Property in Hong Kong (ed Clark) [202] – [300]. While, for myself, I find the Supreme Court decision convincing, this is a dispute I do not think I need to decide given the views I hold on the facts. 114.The second element that must be established in the passing of claim is that of misrepresentation. As Lord Oliver observed in Reckitt & Colman Products Ltd v Borden Inc (above) what is critical is it be established that there is a misrepresentation the person alleged to have been guilty of the passing off leading or likely to lead the public to believe that the goods or services offered by him are the goods or services of the person in whom the mark or name actually vested. Further, as Lord Oliver held: “whether the public is aware of the Plaintiff’s identity as the manufacturer or supplier of thegoods or services is immaterial, as long as they are identified with a particular source which is in fact the Plaintiff.”[166] The element of misrepresentation does not require the establishment of actual confusion but the probability of deception.[167] The deception need not be intentional.[168] Proof of the likelihood of deception may be established by inference.[169] 115.The third element is proof of damage. What must be proved is not so much actual damage as the likelihood of damage.[170] If the goodwill was trivial in nature it might also be reflected in the proposition that no damage has occurred.[171] VENUE Overview 116.The first issue that arises is the appropriate venue for the proceedings. The Defendants submit that the appropriate venue for the determination of theissues which arise in these proceedings is Texas in the United States of America. The issue as to venue arises in relation to all three heads of claim. As will shortly appear, the issues in relation to each head of claim operate differently. Trade marks 117.The Plaintiff’s claim under this head refers to apprehended breaches in Hong Kong of their trade mark rights registered in Hong Kong. The Defendants point to the relevance of the Company Agreement which, amongst other things, led to the formation of the 1st Defendant and say that the construction of that document is critical to the resolution of, amongst other issues, the trade mark issues. The 1st Defendant is a company formed and resident in Texas in the United States of America. The Company Agreement was made in Texas and is governed by Texas law. Further, there are proceedings underway in Texas between the 1st and 2nd Plaintiffs on the one hand and the 1st Defendant on the other for, amongst other things restraint of breaches of intellectual property rights vested in the 1st and/or 2nd Plaintiffs. The Plaintiffs make the point that the action in Texas is based on United States intellectual property rights. 118.On the submissions of the parties, there are two competing jurisdictions: Hong Kong and Texas. The principles which govern this issue are authoritatively outlined in Esquel Enterprises Ltd & Anor v TAL Apparel Ltd & Anor [2006] 2 HKLRD 363. The Court of Appeal held that the fundamental principle was that the court would choose the forum in which the case could be tried more suitably for the interests of all the parties and forthe ends of justice. The approach to forum non conveniens was a 3-stage one:
119.The editors of Hong Kong Civil Procedure 2017 §11/1/12M observe in the application of Esquel Enterprises Ltd & Anor v Tal Apparel Ltd & Anor (above) in relation to proceedings in Hong Kong in respect of infringement in Hong Kong of Hong Kong intellectual property rights that the place of infringement is a “weighty factor” and that in such circumstances the Hong Kong courts “will of course be most reluctant to stay proceedings in respect of infringement in Hong Kong of Hong Kong intellectual property rights.” In relation to intellectual property rights, some support for this can also be seen in Inverness Corporation & Ors v Magic Dreams Cosmetica Infantil, SL & Ors [1997] HKLRD 1377, 1386E–H (although in many respects that decision turns specifically on its own facts). 120.Applying those principles to the present case, the fact the apprehended breach of the trade mark rights asserted by the Plaintiff is in Hong Kong appears to be a very important factor. In this context, the only trade mark rights I have in mind are those mentioned in the interim order. The rights (if any) of the Defendants to use those particular trade mark rights depends, to an extent, on rights which arise from a construction of the Company Agreement because the essential assertions of the Defendants are that they have the consent of the Plaintiffs, and, in particular, the 1st and 2nd Plaintiffs to use those rights and also the defence known as the “own name” defence. I see perfectly the contention of the Defendants that in ventilating the disputes between the parties that witnesses who are resident in North America will almost certainly be required to attend in Hong Kong for trial. Equally, I have not overlooked the proposition that the Company Agreement isan agreement founded on the Law of Texas. However, the primary concern is the breach of the trade mark rights concerned and that is a Hong Kong based matter. While it is true that the Plaintiffs refer to the Company Agreement in the submissions and affidavit material in support of their case, at least so far as the heads of claim relating to trade marks and a passing off, the Company Agreement is relevant but only in a fairly peripheral sense. I am not sure that I could say that the claims in relation to these two heads could stand independently of the company agreement but the content of Article 20.01 of that Agreement does not appear to be critical to the case for the Plaintiff. The fact that the defence of that action may involve, amongst other things, the construction of an agreement entered into in the United States and to be construed by the law of Texas is, in my judgement, a secondary and, in a sense, collateral matter. 121.It seems to me that to the extent that it is necessary to construe that agreement, the primary focus is on the construction of a document in the English language. If there are aids to construction which are dependent on Texas law as opposed to the plain meaning of the document, then I see no difficulty in this court being easily informed of that law in an appropriate and admissible form. The Texas nature of the company agreement appears to me to be an obstacle which is more apparent than real. That may, indeed, overstate the concept of apparent in this context. In my judgment, at least for the determination of the trade mark rights the subject of this application, the justice of the situation comes down firmly on the side of a Hong Kong court having jurisdiction. Passing off 122.The passing off claims are, in my view, quintessentially Hong Kong matter. The claim for passing off involves an application of Hong Kong law and the application of that law to facts which are almost all Hong Kong-based. In this regard, I have in mind what appears to me to be the central issue in passing off: the existence of goodwill. I perfectly accept that given the clarity of the law of passing off in Hong Kong it would be perfectly possible to prove that before a United States court and for that law to be easily understood. However, the evidence is very much Hong Kong-centric and applying the tests for determining the appropriate forum, the answer comes resoundingly in favour of Hong Kong. 123.I have made some observations in relation to the relevance of the company agreement in the context of the trade marks dispute and, in my judgement, those are equally apposite to this end of claim. Resolution of disputes in relation to the Company Agreement 124.The Company Agreement was entered into between the parties in the United States of America. The parties are incorporated in and under the laws of places in the United States. The parties are corporate and otherwise are resident in the United States. It is expressly declared in that agreement that it is to be interpreted in accordance with the law of Texas. Further, there is extant in the United States proceedings between the principal parties and having briefly read aspects of the pleadings in those proceedings, it is plain to me that the issues with respect to alleged breaches of the Company Agreement are well and truly joined and appear to me that it is highly likely that those issues will be well and truly ventilated in the United States courts. Indeed, as the Defendants point out, there is an averment by the Plaintiffs that United States is the appropriate venue in relation to the Company Agreement. (That is, in comparative terms, very low on the list of matters which compel the conclusion I have come to.) 125.For the avoidance of doubt, I readily accept that there are serious issues to be tried with respect to this head of claim. 126.Accordingly, it seems to me that subject to one qualification thatit is highly appropriate that the head of claim in relation to the issue of alleged breaches of the Company Agreement be resolved by litigation in the United States of America. The one qualification is that which I have already alluded to in that concerns the litigation in Hong Kong in relation to trade marks. In that context, the issues of ownership of the trade marks and the issue of consent to use the trade marks could involve the construction and application of the Company Agreement. However, that said, what is fundamentally at stake in these proceedings so far as the trade marks issue is the alleged breach in Hong Kong of trade marks registered in Hong Kong and as I have already held, the appropriate forum for that litigation should be Hong Kong notwithstanding that an aspect of the issues in that litigation involve the construction and application of a US commercial agreement. 127.In short, in my judgement so far as the head of claim in relation to the company agreement, while I accept there are serious issues to be tried in relation to this matter, subject to the qualifications I have mentioned earlier, the balance of convenience in terms of this area comes down in favour of the contentions of the Defendants. DISCUSSION Overview of issues 128.Critical to an understanding of the issues in this case by reference to the inter partes Summons is the endorsement to the Writ of Summons. In this regard, the claim for preliminary interlocutory relief in the inter partes Summons is founded in the first place on claims of the violation of trade mark rights in Hong Kong owned by the Plaintiffs and claims that the Defendants have committed the tort of passing off. They are not alternative claims but subject to qualifications concerning the Company Agreement the Plaintiffs would succeed these proceedings on either the violation of trade mark rights or the passing of claim. 129.In many respects, the issues with respect to the Company Agreement folder be analysed in a different way. In the Writ of Summons the claims with respect to breaches of the Company Agreement assume a wider importance in that context as opposed to the issues in the inter partes Summons. In this regard, the claim in the Indorsement in (1)(c) is for an injunction to restrain, amongst other things, infringing the copyright in the original artistic works of the Plaintiffs’ packaging design et cetera and in (1)(d) an injunction for “otherwise breaching” the Company Agreement in, using the word broadly seeking to challenge certain of the Plaintiffs’ intellectual property; claiming rights or using the intellectual property assets of the Plaintiffs without authority and manufacturing and doing acts incidental to manufacturing certain products out with the terms of the Product Line as that phrase is understood in the Company Agreement. In respect of both sub- paragraphs referred to here, the averments are pleaded very widely and do not, for example, limit themselves to rights in Hong Kong or conduct affecting rights in Hong Kong. (That said, such conduct in Hong Kong would plainly be within the terms of those sub-paragraphs.) In the context of inter partes Summons, the Company Agreement could best be said to arise as an issue in relation to rights concerning the use and treatment of the trade marks the subject of the claim under the Trade Marks Ordinance and to the rights which underlie the issues concerning passing off. 130.The scope of the issues in relation to the Company Agreement for the purpose of the immediate proceedings with which I am concerned is thus narrow and must be understood in that manner. It is possibly right that any construction of the Company Agreement that is appropriate for the disposition of the interlocutory injunction may have implications for the disposal of the Writ of Summons in Hong Kong or, possibly, other litigation which is proceeding in the United States and which may still be proceeding in other parts of the world. As will be obvious, I take the view that the just disposition of the trade mark claims and the passing off claim for the purpose of the interlocutory injunction proceedings do not depend or do not critically depend on a construction or a possible construction of the Company Agreementand the fact that such agreement is a Texas document both as to its origin andconstruction and is the subject of litigation in the United States the treatment of that agreement in this judgement is, at most, collateral. As will already be obvious, I am firmly of the view that for the resolution of the broader claims in respect of the Company Agreement the natural and obvious venue is the United States. However, that should not be a basis for the other claims which, at least for the purposes and by reference to the standards appropriate to interlocutory injunctions have the appropriate level of merit. 131.Tempting (sometimes) though it is to approach this otherwise, the sole scope of the application and the sole object of the orders I propose to make our the preservation of the present position pending trial. Trade mark infringement 132.The case for the Plaintiffs is that they are the owners of the relevant trade marks. They say that the Defendants in proposing to market the Optimera Products in Hong Kong will violate their trade mark rights. The Plaintiffs contend that:
In this regard, the case of the Plaintiffs is there is a likelihood of confusion on the part of the public. Looking at the packages and the containers within the package, images of which are displayed in, amongst other places in the papers, Annex A of the submissions on behalf of the Plaintiffs, they appear virtually identical save to say that one says it is Nerium Formula AD and the other one says Optimera Formula. It is common ground that the former is manufactured by the Plaintiffs and there is no objection to the use of the relevant trade marks on that formulation. The other one, the Optimera Formula, is not manufactured by the Plaintiffs. The Plaintiffs’ case is that the use of the relevant trade marks on those products is objectionable. There is no dispute between the parties as to the origin of that which is manufactured by the Plaintiffs. As I have noted theDefendants contend that the public would regard the 1st Defendant as the source of manufacture. That does not take the matter very far. The 1st Defendant is the distributor. 133.The shape of the packaging and the containers is otherwise as it is to be presented for the Hong Kong market, for all practical purposes identical or very close to identical. Applying the statutory provisions outlined above together with the discussion of the application of those provisions in Tsit Wing (Hong Kong) Co Ltd v TWG Tea Co Pte Ltd (No 2) (above), a conclusion which would be open to a trial court is that viewing the matter through the eyes of the average consumer and looking at the matter as a whole, the origin of the Nerium Formula and the Optimera Formula was the same. Given the use of the trade mark the implied assertion that a court of trial may find is commonality of manufacture, origin and quality. That is the essence of the purpose of a trade mark. The case for the Plaintiff says that the products bearing the name Optimera Formula are well capable of being viewed as infringing. The Plaintiffs submit that in any event there is a serious issue to be tried in relation to that issue. This view is justified. 134.The Defendants contend that they have the consent of the trade mark holder to use the relevant trade marks on the products bearing the assertion Optimera Formula. As will have been seen from my summary of the facts asserted by the parties, this gives rise to two main areas of consideration. The first is the construction of the Company Agreement. The second is whether even if no consent was given by the holders of the relevant trade marks to use those by reason of the Company Agreement, therewas a consent to use the relevant trade marks given in the course of discussions in what has been characterised by both parties as the rebranding exercise. 135.Article 20.01(d)(i) of the Company Agreement defines intellectual property as including “Marks” which, for present purposes is capable of meaning “Trade Marks”. Article 20.01(d)(ii) is well capable of being interpreted as asserting, amongst other things, that the ownership of the intellectual property assets is with the 2nd Plaintiff. As I have already mentioned, a tenable interpretation of the Article 20.01 as not so much creating ownership but simply declaring an existing right. Further, Article 20.01(d)(viii) contains an assertion that the 2nd Plaintiff will grant perpetual licences to allow the 1stDefendant to utilise the intellectual property rights to the extent reasonably necessary for the marketing, distribution and sale of the Product Line. That is capable of being interpreted as an undertaking in the future. That might be considered to be consistent with Article 4.03 of the Agreement which contemplates the future execution of a Distribution and Licensing Agreementbetween NI and Nerium SkinCare to “…provide for the use of the intellectualproperty, formulation of the Product Line, et cetera” and that such an agreement has never been made. On that construction, the implication is that at least at the time of the Company Agreement a perpetual licence to the 1stDefendant to use the relevant trade marks had never come into being. The Defendants accept that such an agreement has not been made. A conclusion which is possibly open on these facts is that at least until the rebranding exercise the right to relevant trade marks remained with the 2nd Plaintiff. 136.On the premise that at least until the rebranding exercise the relevant trade marks remained the property of the Plaintiffs, the factual assertions of the Plaintiffs and the Defendants as to the so-called rebranding exercise need to be considered. The position of the Plaintiffs is that the issue of allowing the Defendants to use the intellectual property the subject of dispute was raised in the discussions concerning rebranding. The position ofthe Plaintiffs is that this was, in effect, to be agreed if (and only if) the Plaintiffsmanufactured the Optimera Products. According to the Plaintiffs, the matterwas never resolved and it would follow from that position that, on that premise, the rights possessed by the 2nd Plaintiff in relation to the relevant trade marks was never altered. The position of the Defendants is that this is wholly untrue. Indeed, the affidavit of Eric James Haynes makes the same assertion but points to a series of emails exchanged with employees of the Plaintiffs which might be construed as accepting the position that at least permission to use the relevant trade marks had been passed to the Defendants. The contention by Mr Haynes is that the 1st and 2nd Plaintiffs did not object to the rebranding. Mr Haynes exhibits as EH-3 certain emails from the 1st and 2nd Plaintiffs which do not express any mention of the condition upon which the 1st and 2nd Plaintiffs contend was in existence. No explanation has been provided as to why these emails were not in the affidavit of Mr Olson. However, there is an issue as to whether it could properly be said that these emails were necessarily an appropriate forum or vehicle for making the point which Mr Haynes says is absent from them. On a matter such as the handing over of possibly valuable intellectual property, I think that in resolving what is clearly a serious issue to be tried, the position of the CEO of the 1st Plaintiff might carry greater weight than that of his underlings. However, that is a matter for trial. 137.In support of the position of the Defendants, Mr Olson makes the point that there is no documentation to support the position of the Plaintiffs. It is not a matter that I consider necessary for me to resolve at this stage. Indeed, I consider that it could not possibly be resolved through affidavit evidence, but it would seem to me to be a tenable position on the part of the Plaintiffs that given they were giving up possibly valuable intellectual property rights, there might have been expected to be something which confirmed that they had given up those rights rather than the opposite contention advanced by the 1st Defendant. Further, although this is not pointed to by the Plaintiffs it might be a tenable position that the position of the Defendants implies that the Plaintiffs were giving up such valuable rights for, in effect, possibly nothing other than for the possible increase in revenue from their 30% share company revenue from the sale of the Optimera Products as provided in the Company Agreement. However, in my judgement there is a serious issue to be tried in relation to the issue of whether the Plaintiffs consented to the 1st Defendant using the relevant trade marks. 138.The case for the Defendants is that they have an “own name” defence whereby they used their own name according to honest practices in industrial or commercial matters which use is permitted under the Ordinance. The Defendants go further and say that such use is “required” under the Company Agreement. Implicit in their argument is that there is no serious issue (or issues) to be tried in this connection. 139.The Plaintiffs contend that the Defendants using the “own name” defence under section 19(3) of the Ordinance is misconceived. Again, they say that in any event there is a serious issue to be tried in relation to that issue. 140.The Defendants say that the name of their company is Nerium International and indeed, they point to Article 2.02 of the Company Agreementwhich, they say, mandates that in relation to the promotion of the Product Line they are required to use Nerium International. In order to determine this issue, it is helpful to look at the Company Agreement.[172] That provides:
It is common ground that the Manager is Mr Olson. In the same section of the Agreement, Article 2.05 defines the purposes of the company which are “the development, purchase, distribution and sale of all cosmetic and over the counter (OTC) products that have been developed or are in the future developed by Nerium and/or its affiliated company Nerium Biotechnology Inc…” In that context, Nerium means Nerium Skincare, Inc per the openingArticle of the Agreement. Article 2.05 also makes a reference to the “Product Line”. Article 2.05 goes on to say that “such Product Line shall include, but not be limited to, those products identified on the attached exhibit C.” Exhibit C attached to the Agreement has two divisions but the only reference in that document is to products—and in some places, associated product—produced by Nerium or Nerium Biotech. Quite where the Optimera Formula products—which are not produced by Nerium or Nerium Biotech—fit into Exhibit C is not entirely plain. The argument of the Plaintiffs appears to be that even if there is an obligation under Article 2.02 to use the name Nerium International it can only be in relation to products in the Product Line and those products are all manufactured by Nerium or Nerium Biotech. If that is right, then the obligation asserted under Article 2.02 does not apply to the Optimera Formula products sold by Nerium International. 141.The answer of the Defendants is that there is nothing, whether under the Company Agreement or otherwise, which prohibits the 1st Defendant from marketing products other than those supplied by Nerium SkinCare, and under its own name, or under names or marks or get-ups or other indicia in which the 1st Defendant owns the intellectual property, or as a placeholder or otherwise. The Plaintiffs say that Article 2.02 could not refer to the use of that name as a trade mark. That, so the Plaintiff argues, would be inconsistent with the whole tenor of the Company Agreement. The Plaintiffs point to Article 2.02 with speaks of the use of Nerium International or “such other names that comply with applicable law”. Plainly, so the Plaintiffs argue, the use of Nerium International could not comply with the applicable law being the trade mark law of Hong Kong. 142.Given the nature of the “own name” defence as I have outlined above, there is at least an argument that the Defendants could not come withinthis defence at all. However, all that needs to be considered is whether there is a serious issue to be tried respect to this matter. 143.The Plaintiffs make the point that what the Defendants have done is deliberately to give the consumers an impression that there is in fact aconnection between the Nerium signs on the Optimera Formula products andthe products of the Plaintiffs so as to take an unfair advantage of the distinctive character and repute of the relevant trade marks owned by the Plaintiffs. In this regard, while there is, in one sense, a connection between the two productsin that they both have a common distributor, the whole purpose of a trade markis to make a statement about origin in the sense of manufacture. The Plaintiffscontend that they manufacture a distinctive product that, amongst other things,has a distinctive ingredient not found in the Optimera Formula. In my opinion,for the purposes of these proceedings, there is clearly a serious issue to betried in respect of this matter and, in my opinion, the position of the Defendants is, at least by that standard, perhaps difficult to maintain. Further, the obligation identified by the authorities including Gucci v Gucci (above) require the Defendants to make it perfectly clear to the public that there is no connection between the products with the Optimera Formula and those by thePlaintiffs. Indeed, there is, at minimum, a serious issue to be tried in respect of this and that comes against the background of the case for the Plaintiffs that the Defendants are doing quite the opposite of trying to make a distinction:there is an inference open in this case that they are improperly and dishonestlyattempting to suggest that the products with the Optimera Formula have been made by and have the origin of the products manufactured by the Plaintiffs. 144.The case for the Plaintiffs is that an interlocutory injunction is anappropriate remedy because if the Defendants are allowed to use the trade mark rights of the Plaintiffs then the Plaintiffs will suffer irreparable damage and damage that cannot be compensated sufficiently by monetary damages. The focus of the argument on the part of the Plaintiffs is the erosion of what they call the exclusivity and distinctiveness of the marks. It is contended by the Plaintiffs that such an erosion would, in the context of this case, be difficult to assess in terms of monetary damages. While it seems to me that this might not always be the case in applications for interlocutory injunction in trade mark cases, it must be right in the context of the present case. In my opinion, there is a serious issue to be tried particularly where the non-offending and offending products are to be introduced into the Hong Kong market in a substantial way for the first time. I can readily imagine cases (this is not one of them) where the two products had been present in the market for a substantial time in substantial quantity that this contention may not either have the same force or, indeed, any force at all. While the evidence does suggest that there have been products manufactured by the parties available in the Hong Kong market, that seems to be as a result of resellers from outside Hong Kong shipping to Hong Kong. What is at stake in the present case is not that form of marketing and what appears to be the position in the present case is a form of marketing which is, in many respects, the antithesis of efforts by resellers out of Hong Kong. I note also in the affidavit of Eric James Haynes that he says that the Defendants would suffer irreparable damage if they are not allowed to sell the products with the Optimera Formula in Hong Kong. There is clearly a substantial issue to be tried in this regard. 145.The issue of delay is raised by the Defendants. They point to the marketing of products with the Optimera Formula in other jurisdictions and, in those jurisdictions, the Plaintiffs or the relevant representatives of the Plaintiffs have done nothing. They also contend that the Plaintiffs have been guilty of delay in the institution of Hong Kong proceedings. In my opinion, the issue of delay in other proceedings is not matter of great moment. In my judgement it certainly does not operate to disentitle the Plaintiffs to their remedy of an injunction — particularly given that as may be obvious from earlier observations that, applying the relevant tests, the Plaintiffs have clearly made out their case for an injunction. 146.In case I am wrong about that, I make the point that the essence of the evidence of the parties is that since at least some time in 2014 there had been something of a falling out of the parties and that falling out has been accompanied by efforts to resolve the differences which appear to have arisen between the parties. Indeed, it would appear that a substantial part of the differences involves arguments about the use of the intellectual property owned by the Plaintiffs in the marketing of products with the Optimera Formula. It seems to me that to the extent that delay in proceeding is attributable to good-faith attempts at a commercial as opposed to a litigious resolution of the dispute between the parties that should not be held against the Plaintiffs. That is so even if those attempts carry with them elements of a preparedness not to litigate even where their rights might have been infringed. 147.I also see the argument by the Defendants that the distinctiveness of the Plaintiffs’ products has already been diluted by marketing in other places such as Korea, Canada and Mexico.[173] I do not think that even if this is right that this carries the day for matters specific to Hong Kong—at least for this stage of the proceedings. In my view, there is an unrealistic assumption in the case for the Defendants in this respect: that such dilution as there may have been elsewhere automatically carries over to diminish the damage asserted by the Plaintiffs in the specific instance of the Hong Kong market. I readily accept that the globalism that is so much with us today renders markets in specific localities somewhat less distinct but, on the provisional basis appropriate for this interim order, I do not accept the kind of argument for, in effect, merger of identity which is at the heart of the argument for the Defendants. 148.The real issue seems to me to be in relation to time: whether the delay has in some ways made it unjust to grant the injunction claimed. I do not think that it is unjust in this sense. Unless I was prepared to accept completely to the exclusion of the case for the Plaintiffs that there had been a complete resolution following the rebranding exercise of all of the disputes as between the parties in relation to the use of intellectual property, the Defendants could not have been lulled into a false sense of security that all had been agreed between the parties. I have already found that there is a serious issue to be tried in that regard. 149.In my judgement, the Plaintiffs have made out their case for an injunction in relation to the first principal head of their application: the Hong Kong trade marks on the issues I have identified, and recognising that there are competing contentions, the evidence before me establishes that there are serious issues to be tried both in relation to the primary claim for ownership of the trade marks and, perhaps more pertinently, there are serious issues to be tried in relation to the defences proffered by the Defendants. 150.In my judgement, in relation to the first head of claim, there is/are manifestly a serious issue or serious issues to be tried. This is, in my judgement, not merely about a loss for which the Plaintiffs could be adequatelycompensated with damages. There is an issue of reputation and vindication at the heart of the claim of the Plaintiffs under this head. If I understand the essence of the Plaintiffs’ claim in this context correctly, they are saying that association of the Optimera Products which do not contain the Nerium Oleander component with products which contain the critical that do is a critical concern and if the Defendants were allowed to do that there is no walking back that association. Having already taken into account the argument that this issue should be resolved in the United States, I am firmly of the view that the balance of convenience comes down firmly in favour of the Plaintiffs under this head. 151.For the reasons I have identified, I would grant the interim injunction sought by the Plaintiffs. In view of the exchanges over the course of these proceedings, it seems to me that an order which covers the marks in the current iteration of the interim order would meet the justice of the case. Passing off 152.The critical issue appears to me to be whether the Plaintiffs can establish a serious issue to be tried as to the existence of goodwill in Hong Kong. The evidence suggests that there has never been an attempt to market the Nerium products in Hong Kong. The real issue is whether there is a serious issue to be tried as to the existence of customers in Hong Kong. As the authorities clearly establish the issue is customers and not legal presence within the jurisdiction. 153.There is evidence through websites such as fishpond.com and eBay.com where there are offerings for sale of NeriumAD products. There appears to be no direct evidence of sales in Hong Kong but there appears to be an issue as to whether such sales could be inferred from the offering of such products on websites such as fishpond.com and eBay.com. As has already been noted, there exist printouts of the number of places within those websites where NeriumAD was offered for sale. The fact that those printouts were brought into existence before the commencement of the action does not take the matter very far because it would be stretching credulity beyond acceptable breaking point to suggest that such operations did not continue after the commencement of the proceedings. Equally there exists a blog which wouldappear to be offering these products. Given how international marketing sitessuch as Amazon.com, fishpond.com and eBay.com operate it is at least possiblethat there are some sales in Hong Kong. There appears to be no evidence atpresent as to the extent of such sales being generated by such websites. The possibility of one, or two, or four, or even ten sales might, conceivably, create a trivial quantum of goodwill but I do not think that there is a good arguable case that raises that goodwill (assuming there to be any at all) beyond the merely trivial. The authorities on the proposition that there must be established at the existence of more than trivial goodwill do not (and could not possibly) quantify the cut-off point for trivial and non-trivial. The issue must be very much context driven in the light of the nature of the product at issue. For some products which would be protected by the tort of passing off there would be, of necessity a very low volume of sales but nevertheless would create a non-trivial quantum of goodwill. The example I have in mind in this regard is high-end high-performance sports cars where there might be only one or two sold in Hong Kong in any given period. Such sales would, in my judgement, provided least a good arguable case of the existence of goodwill within this jurisdiction. The sales of, say, 10 cans of a proprietary fizzy drink may, arguably, not. In short, in my judgement, the very best it could be said in favour of the Plaintiffs is that conceivably there are some sales of their products in Hong Kong but there is not a good arguable case that it gets beyond the trivial. Indeed, the whole object of the marketing exercise which might havebeen conducted in Hong Kong before the falling out of the parties was designed to attain and, no doubt rapidly attain, substantial sales in Hong Kong. 154.It follows from this that I do not consider I need to make any findings about the second element which must be established to found the tort of passing off. It would follow from what I have said that in relation to the third element that of damage, if there is damage, it is at the trivial level. 155.In short, in my view, the Plaintiffs have failed to make out on thebasis of the evidence placed before me that there are serious issues to be tried in relation to the issue of the goodwill component of the tort of passing off. If I was wrong about that, the issue of balance of convenience would fall to beconsidered. If I had been persuaded that there were serious issues to be triedand if I had resolved that in favour of the Plaintiffs, I would have been in nodoubt that the balance of convenience would favour the issue of an injunction. I would have done so for essentially the same reasons as in relation to the trade mark head of claim. On the bases that I have identified, I would refuse an interim injunction in relation to this head of claim. Resolution of disputes in relation to the Company Agreement 156.In relation to the issues raised in relation to the Company Agreement and the alleged breaches thereof, there are manifestly serious issuesto be tried. However, in my judgement, for the reasons I have already outlined, the balance of convenience points directly to the United States as the more appropriate jurisdiction to resolve those disputes subject to the qualification I have already identified in relation to the trade mark head of claim and, if necessary, the passing off claim. I would refuse an interim injunction in relation to this head of claim. FORTIFICATION OF USUAL UNDERTAKING AS TO DAMAGES 157.The Defendants seek a fortification of the undertaking as to damages by giving security. The principles governing such a course are well-established. It is for the Defendant to show the likelihood of a significant loss arising as a result of the injunction and a sound basis for belief that the undertaking to make good any such loss will be insufficient. The editors of Hong Kong Civil Procedure 2017 §29/1/24 make the point that the quantification of any loss would lie in the future but the court is nonetheless required to make an intelligent estimate of the likely amount of loss that would be caused by the grant of the injunction. In such a cause, the court is required to take a broad view without necessarily resolving all arguments which have been raised regarding the amount to be ordered. 158.I think that the analogy propounded by the Defendants between the figures quoted for the Korean venture and Hong Kong is not sound. It is not necessarily a comparison of like against like. Further, quite how the potential market in the balance of the People’s Republic of China comes into this equation is something which I do not see. Nevertheless, we are potentially looking at a substantial amount of money being at stake. I have fully taken into account the evidence on behalf of the Defendants to the effect that setting up a marketing operation of the kind in contemplation in this case involves both time and the expenditure of resources. On the face of it, in the event that the Defendants were to succeed following a trial, the Plaintiffs would almost certainly be liable for such expenditure. The affidavit evidence as to what goes into setting up a multi-level marketing operation is something I can readily accept.[174] 159.It is one thing to go from the obvious proposition that a substantial amount of money is at stake in either permitting or restraining parties. It is another thing to then get to the issue of what amount might be lodged as fortification. The Defendants propose HK$100 million. They provide no figures to support that figure or anything like it. I have resisted the temptation to conclude that this sum is simply plucked from the air. The problem is that I consider there must be fortification to some extent. In my judgement, doing the best that I can with the limited information provided on this topic, I consider that fortification in the sum of HK$10 million would fit the bill. RECEPTION INTO EVIDENCE OF AFFIDAVIT OF ERIC JAMES HAYNES 160.The Defendants sought to introduce the affidavit of Eric James Haynes sworn on 28 September 2016 into proceedings on 29 September 2016. Those representing the Plaintiffs complained, validly in my opinion, as to the late service of the affidavit. Mr Haynes is the Chief Legal Officer of the 1st Defendant. No explanation was offered nor is any explanation contained within the affidavit as to why it came into being as late as the day before the hearing. What became apparent when the affidavit was examined it covered the following topics:
161.Items (1) and (2) can be taken together. The affidavit in this respect adds nothing to the affidavit of Mr Olson. It is essentially a restatement in argumentative form as to what has been said before. The failure on the part of the Plaintiffs — particularly the 1st and 2nd Plaintiffs — to take legal action in various jurisdictions is discussed in the affidavit of Mr Olson. The position of Mr Olson so far as the consent by the 1st and 2nd Plaintiffs to a rebranding exercise is restated. The only thing that is new so far as that is concerned is an assertion in positive form that Mr Knocke was not present at the meeting at which the representatives of the 1st and 2nd Plaintiffs agreed to the rebranding exercise in unqualified terms. The exhibit EH-1 purports to be a calendar entry for a meeting on 15 January 2015 between the 1st Defendant and the 1st Plaintiff. An examination of that exhibit does not take the matter any further. The author of that entry is not manifest from thedocument. If it is Mr Haynes then it is simply, at most, a memory refreshing document. It says nothing about the content of the meeting. 162.Support for the contention that the 1st and/or 2nd Plaintiffs would not be appropriate for manufacturing the Optimera Products is said to come from the fact that there are production problems with respect to the Nerium Products. This appears to be the only new item of content and arises throughexhibit EH-2. The first email in that exhibit makes an assertion that 100,000 items of a particular product were due as at the date of the email and only 7300 units had been received. Whether that supports the contention that Mr Haynes makes is, to put it politely, open to doubt. 163.The observations of Mr Haynes in relation to the launch in Korea and the litigation in Japan underlined with clarity the undesirable consequences of filing the affidavit very shortly before the hearing. 164.The observations of Mr Haynes as to the difficulties of setting up a multi-layer marketing operation in Hong Kong or elsewhere is, hardly controversial. Indeed, a better description might be self-evident. That trouble and expense has been taken and incurred I do not have a great deal of difficulty in accepting. This aspect of the affidavit is largely argument and adds little to the case. 165.The basis upon which I admitted this affidavit in spite of the perfectly understandable prohibition against further evidence without leave of the court was perhaps generous. SUMMONS BY DEFENDANTS Non-disclosure 166.None of the complaints of the Defendants even begin to justify setting aside the ex parte order. Most of the bases for argument are simply contentions about the merits of the matters which have been litigated and would not, in my judgement have justified themselves as arguments for not granting service out of the jurisdiction. Implicit in the submission of the Defendants is something coming very close to the suggestion that the ex parte judge should have conducted a mini trial. The issues about disclosure in relation to the formation and nature of the Company Agreement and its connection with United States are largely self-evident. It seems to me that Deputy Judge Kent Yee had sufficient materials before him to make the determinations that he did. Venue 167.The issues about venue have already been identified and there is nothing further that needs to be articulated in relation to that. Conclusion on the Defendants’ summons 168.That summons is dismissed. CONCLUSION 169.In my judgement, for the reasons outlined above, the Plaintiffs succeed in the application in relation to the trade marks head of claim and fail on the other two claims. I order that there be fortification as appears in the body of this judgment. The Defendants’ summons is dismissed. 170.I make an order nisi that costs go to the Plaintiffs and such order if not challenged within 14 days of the handing down of this judgment that order be made absolute. 171.Any expression of gratitude that I make to the team of lawyers on both sides of this dispute appears to me end up in understatement. Thus, let me conclude with understatement: I am very grateful.
Mr Winnie Tam SC and Mr Martin Kok, instructed by Deacons, for the 1st to 3rd Plaintiffs Mr Stewart Wong SC and Mr Philips B F Wong, instructed by Baker & McKenzie, for the 1st and 2nd Defendants [1] 1st Affidavit of Dennis Ray Knocke, ¶4. [2] 1st Affidavit of Dennis Ray Knocke, ¶5. [3] 1st Affidavit of Dennis Ray Knocke, ¶6. [4] 1st Affidavit of Dennis Ray Knocke, ¶9. [5] 1st Affidavit of Dennis Ray Knocke, ¶11. [6] 1st Affidavit of Dennis Ray Knocke, ¶12. [7] 1st Affidavit of Dennis Ray Knocke, ¶29. [8] 1st Affidavit of Dennis Ray Knocke, ¶13. [9] 1st Affidavit of Dennis Ray Knocke, ¶14 and 2nd Affidavit of Dennis Ray Knocke, ¶¶84 – 86. [10] 1st Affidavit of Dennis Ray Knocke, ¶15. [11] In this regard, see exhibit DRK-5 which is a table which sets out trade mark details for the 1st Plaintiff’s trade mark registrations in Hong Kong; exhibit DRK-6 which sets out a table of the 1st Plaintiff’s pending trade mark applications in Hong Kong; exhibit DRK-7 which exhibits certificates of the 1st Plaintiff’s trade marks registered in the United States; exhibit DRK-8 which exhibits evidence of foreign trade marks owned by the 1st Plaintiff. These exhibits are annexed to the 1st Affidavit of Dennis Ray Knocke. [12] 1st Affidavit of Dennis Ray Knocke, ¶20; 2nd Affidavit of Dennis Ray Knocke, ¶13. See also exhibit DRK-7 (above). [13] 1st Affidavit of Dennis Ray Knocke, ¶¶16 – 17. See also exhibit DRK-5 (above). [14] 1st Affidavit of Dennis Ray Knocke, ¶¶16 – 17. See also exhibit DRK-6 (above). [15] 2nd Affidavit of Dennis Ray Knocke, ¶15. The Plaintiffs say that the 1st Defendant was notified of this: 2nd Affidavit of Dennis Ray Knocke, ¶19. [16] 2nd Affidavit of Dennis Ray Knocke, ¶20. The Plaintiffs point to Exhibit DRK-56 in relation to the 1st incident and Exhibit DRK-57 in relation to the exchange of correspondence concerning the 2nd incident. [17] 1st Affidavit of Dennis Ray Knocke, ¶¶24 – 25. [18] 1st Affidavit of Dennis Ray Knocke, ¶28. [19] 1st Affidavit of Dennis Ray Knocke, ¶30. See in this regard exhibit DRK-10 which appears to be the certificate of incorporation of the 1st Defendant. [20] 1st Affidavit of Dennis Ray Knocke, ¶32. See also exhibit DRK-11. The 1st Plaintiff is a party to the Company Agreement as a joint and several guarantor of the 2nd Plaintiff. [21] There are set by the Plaintiffs be some exceptions to the worldwide nature of the basis for distribution. [22] 1st Affidavit of Dennis Ray Knocke, ¶¶37 and 38. [23] 1st Affidavit of Dennis Ray Knocke, ¶39. [24] 1st Affidavit of Dennis Ray Knocke, ¶40. [25] 1st Affidavit of Dennis Ray Knocke, ¶49. [26] 1st Affidavit of Dennis Ray Knocke, ¶49. [27] 1st Affidavit of Dennis Ray Knocke, ¶50. [28] 1st Affidavit of Dennis Ray Knocke, ¶¶56 – 62. [29] 1st Affidavit of Dennis Ray Knocke, section 4.2; 2nd Affidavit of Dennis Ray Knocke, section 5.8. [30] 1st Affidavit of Dennis Ray Knocke, ¶67; 2nd Affidavit of Dennis Ray Knocke, ¶¶115 – 117. [31] 1st Affidavit of Dennis Ray Knocke, ¶¶68 – 71. [32] 1st Affidavit of Dennis Ray Knocke, ¶¶71 and 75. [33] 1st Affidavit of Dennis Ray Knocke, ¶76. This was said to involve expending resources on obtaining appropriate legal advice where necessary. [34] 1st Affidavit of Dennis Ray Knocke, ¶77. See exhibit DRK-17. [35] 1st Affidavit of Dennis Ray Knocke, ¶81. [36] 2nd Affidavit of Dennis Ray Knocke, ¶122. [37] 1st Affidavit of Dennis Ray Knocke, ¶80; 2nd Affidavit of Dennis Ray Knocke, ¶122. [38] 1st Affidavit of Dennis Ray Knocke, ¶81; 2nd Affidavit of Dennis Ray Knocke, ¶122. [39] See 1st Affidavit of Dennis Ray Knocke, section 5.2.1. [40] 2nd Affidavit of Dennis Ray Knocke, ¶48. [41] 2nd Affidavit of Dennis Ray Knocke, ¶¶48 – 49. [42] 1st Affidavit of Dennis Ray Knocke, ¶81. [43] 1st Affidavit of Dennis Ray Knocke, ¶83 [44] 1st Affidavit of Dennis Ray Knocke, ¶124. 2nd Affidavit of Dennis Ray Knocke, ¶122. [45] 1st Affidavit of Dennis Ray Knocke, ¶126. [46] 2nd Affidavit of Dennis Ray Knocke, ¶83. [47] 1st Affidavit of Dennis Ray Knocke, ¶¶92 – 95. See also exhibit DRK-19, 20 and 21. [48] 1st Affidavit of Dennis Ray Knocke, ¶¶97 and 100. See also exhibit DRK-22 and 25. [49] 1st Affidavit of Dennis Ray Knocke, ¶98. See also exhibit DRK-23. [50] 1st Affidavit of Dennis Ray Knocke, ¶96. See also exhibit DRK-16. [51] 1st Affidavit of Dennis Ray Knocke, Section 5.2.2. [52] 1st Affidavit of Dennis Ray Knocke, ¶103. [53] 1st Affidavit of Dennis Ray Knocke, 6.1 and Section 6.2. [54] 1st Affidavit of Dennis Ray Knocke, Section 7. See also exhibit DRK-29 and 30. [55] 1st Affidavit of Dennis Ray Knocke, ¶¶121 – 122. See also exhibit DRK-31 and 32. The latter reveals the opposition of 1st Plaintiff to such process. [56] 1st Affidavit of Dennis Ray Knocke, ¶¶129 – 145; 2nd Affidavit of Dennis Ray Knocke, ¶128. The Plaintiff also points to exhibit DRK-89. [57] Plaintiffs’ Submissions, 23 August 2016, ¶33. [58] Plaintiffs’ Submissions, 23 August 2016, ¶34; 1st Affidavit of Dennis Ray Knocke, section 5.2.2. [59] 1st Affidavit of Dennis Ray Knocke, section 7 which exhibits a summary of the 1st Defendant’s US trade mark applications and those made by the one in Hong Kong. [60] 1st Affidavit of Dennis Ray Knocke, ¶¶121 and 122. [61] 1st Affidavit of Dennis Ray Knocke, ¶63. [62] 1st Affidavit of Dennis Ray Knocke, ¶64. [63] 1st Affidavit of Dennis Ray Knocke, ¶¶64 – 66; 2nd Affidavit of Dennis Ray Knocke, ¶137 and exhibits annexed thereto. [64] 2nd Affidavit of Dennis Ray Knocke, ¶¶35 – 50 and exhibits annexed thereto. [65] Affidavit of Jeffrey Alan Olson, ¶7. [66] Affidavit of Jeffrey Alan Olson, ¶18. [67] Affidavit of Jeffrey Alan Olson, ¶10. [68] Affidavit of Jeffrey Alan Olson, ¶¶11 – 12. [69] Affidavit of Jeffrey Alan Olson, ¶¶13 – 17. [70] Affidavit of Jeffrey Alan Olson, ¶18. [71] Affidavit of Jeffrey Alan Olson, ¶19. [72] Affidavit of Jeffrey Alan Olson, ¶¶19 – 21. [73] Affidavit of Jeffrey Alan Olson, ¶23. [74] This is a reference to ¶3 of those submissions which says: “P1 and P2 appointed the 1st Defendant as their exclusive licensee for the sale of Ps’ products containing Nerium Oleander worldwide (withlimited exceptions).” The Plaintiffs contend for a different construction of the Company Agreement. See 2nd Affidavit of Dennis Ray Knocke, ¶134. [75] Affidavit of Jeffrey Alan Olson, ¶117. [76] Affidavit of Jeffrey Alan Olson, ¶¶25 and 26. This is a reference to the 1st Affidavit of Dennis Ray Knocke, ¶39. [77] That assertion appears in the 1st Affidavit of Dennis Ray Knocke, ¶39. [78] Affidavit of Jeffrey Alan Olson, ¶32. [79] Affidavit of Jeffrey Alan Olson, ¶36. [80] Affidavit of Jeffrey Alan Olson, ¶38. [81] Affidavit of Jeffrey Alan Olson, ¶39. [82] Affidavit of Jeffrey Alan Olson, ¶40. [83] Affidavit of Jeffrey Alan Olson, ¶¶43 – 44. [84] Affidavit of Jeffrey Alan Olson, ¶52. [85] Affidavit of Jeffrey Alan Olson, ¶53. The Defendants refer to exhibit JO-15 in this regard. [86] Affidavit of Jeffrey Alan Olson, ¶54. [87] Affidavit of Jeffrey Alan Olson, ¶¶56 – 59. [88] Affidavit of Jeffrey Alan Olson, ¶¶60 – 62 [89] Affidavit of Jeffrey Alan Olson, ¶64. [90] Affidavit of Jeffrey Alan Olson, ¶¶66 – 67. [91] Affidavit of Jeffrey Alan Olson, ¶70; Affidavit of Eric James Haynes, ¶¶6, 8 – 12. [92] Affidavit of Jeffrey Alan Olson, ¶70. The purchase order referred to is exhibit JO-20. [93] Affidavit of Jeffrey Alan Olson, ¶71. [94] Affidavit of Jeffrey Alan Olson, ¶73. [95] See 1st Affidavit of Dennis Ray Knocke, ¶¶96 – 101. [96] Affidavit of Jeffrey Alan Olson, ¶83. [97] Affidavit of Jeffrey Alan Olson, ¶84. [98] Affidavit of Jeffrey Alan Olson, ¶88. [99] Affidavit of Jeffrey Alan Olson, ¶89. [100] Affidavit of Jeffrey Alan Olson, ¶116. [101] Affidavit of Jeffrey Alan Olson, ¶117. [102] Affidavit of Jeffrey Alan Olson, ¶80. [103] Affidavit of Jeffrey Alan Olson, ¶¶122, 130. [104] Affidavit of Jeffrey Alan Olson, ¶125. [105] Affidavit of Jeffrey Alan Olson, ¶123. [106] Affidavit of Jeffrey Alan Olson, ¶127. [107] US Judgement, Part II. The citations in the quotation are simplified. [108] Plaintiffs’ submissions dated 27 March 2017, ¶6. [109] Plaintiffs’ submissions dated 27 March 2017, ¶7. [110] Plaintiffs’ submissions dated 27 March 2017, ¶¶8, 17.5. [111] Plaintiffs’ submissions dated 27 March 2017, ¶11. [112] Plaintiffs’ submissions dated 27 March 2017, ¶12. The plaintiffs also point out NeriumRX was not dealt with at all in the US District Court proceedings: ¶17.4. [113] Plaintiffs’ submissions dated 27 March 2017, ¶¶14, 16. [114] Plaintiffs’ submissions dated 27 March 2017, ¶¶15, 16. [115] Plaintiffs’ submissions dated 27 March 2017, ¶18. [116] Plaintiffs’ submissions dated 27 March 2017, ¶20.1. [117] Plaintiffs’ submissions dated 27 March 2017, ¶20.3. [118] Defendants’ submissions dated 3 April 2017, ¶¶4, 8. [119] Defendants’ submissions dated 3 April 2017, ¶4(a). [120] Defendants’ submissions dated 3 April 2017, ¶4(a). [121] Defendants’ submissions dated 3 April 2017, ¶4(b). [122] Defendants’ submissions dated 3 April 2017, ¶4(b). [123] Defendants’ submissions dated 3 April 2017, ¶4(b). [124] Defendants’ submissions dated 3 April 2017, ¶¶4(c), 23. [125] Defendants’ submissions dated 3 April 2017, ¶ 24. [126] Defendants’ submissions dated 3 April 2017, ¶ 6. [127] Defendants’ submissions dated 3 April 2017, ¶ 7. As a matter of mind-numbing technicality, the court which determined the motion for the Preliminary Injunction is a federal court rather than a state court, but that does not diminish the argument that the agreement is to be construed by the law of Texas and with the best will in the world there are obvious advantages in an American court determining what is truly an American issue. [128] Defendants’ submissions dated 3 April 2017, ¶ 9. [129] Defendants’ submissions dated 3 April 2017, ¶9, footnote 2. [130] Defendants’ submissions dated 3 April 2017, ¶10. [131] Defendants’ submissions dated 3 April 2017, ¶13. [132] Defendants’ submissions dated 3 April 2017, ¶14. [133] Defendants’ submissions dated 3 April 2017, ¶15. [134] Defendants’ submissions dated 3 April 2017, ¶ 16. [135] American Cyanamid Co v Ethicon Ltd [1975] AC 396 [136] [1979] 1 WLR 1294, 1306 in the speech of Lord Diplock. [137] [2010] 2 HKLRD 1041, 1046, ¶12(4). See also Sima Sai Er v Next Magazine Publishing Ltd & Others HCA 1500/2014, ¶8. [138] HCA 1823/2012, ¶¶13 – 16. [139] HCA 1823/2012, ¶13. [140] [2009] 3 HKLRD 524, ¶94. [141] Kerly’s Law of Trade Marks and Trade Names 15th edition, ¶2-010. [142] (2016) 19 HKCFAR 20, ¶44. [143] (2016) 19 HKCFAR 20, ¶47. These principles were adopted from the judgment in the English Court of Appeal of Kitchin LJ in Specsavers International Healthcare Ltd v ASDA Stores Ltd [2012] FSR 555. [144] ¶9-093. [145] Bentley, Intellectual Property Law (4th edition), pages 984 – 985. [146] ¶14-083. [147] [2012] FSR 19, 583, ¶87. [148] [2009] 5 HKLRD 28, ¶¶80 – 81, citing Sabel BV v Puma AG [1998] RPC 199. The same point is made in Julius Sämaan Ltd v Tetrosyl Ltd [2006] FSR 42, ¶51. [149] Section 19(1), Trade Marks Ordinance. [150] Kerly’s Law of Trade Marks and Trade Names (15th edition), ¶15-104. [151] Trade Marks Act, 1938, section 8(a). [152] HCA 204/2006, 7 July 2006, ¶35. [153] [2002] FSR 31, 501, ¶43. [154] [2009] 5 HKLRD 28, ¶99. [155] [2009] 5 HKLRD 28, ¶101, citing Boswell-Wilkie Circus (Pty) Ltd v Brian Boswell Circus (Pty) Ltd [1986] FSR 479. [156] (2009) 12 HKCFAR 808, ¶17. [157] [1990] RPC 341, 406. [158] Kerly’s Law of Trade Marks and Trade Names 15th edition, ¶18-040. [159] Hart v Relentless Records Ltd [2003] FSR 36, ¶¶62 – 63; Hugo Boss Trademark v Britain Boss International Co Ltd [2015] 3 HKLRD 4, ¶131. [160] Wadlow, The Law of Passing Off (4th edition), ¶3-147. [161] International Hotel Investments Plc & Anor v Jet Union Development Ltd & Anor HCA 1941/2015, ¶26; Starbucks (HK) Ltd v British Sky Broadcasting Group (No 2) [2015] 1 WLR 2628. [162] Wadlow, The Law of Passing Off (4th edition), ¶3-063. [163] [2002] 3 HKLRD 595, ¶15. [164] [2002] 3 HKLRD 595, ¶16. [165] [2015] 1 WLR 2628, 2642, ¶47. [166] Reckitt & Colman Products Ltd v Borden Inc [1990] RPC 341, 405. [167] Guccio Gucci v Gucci [2009] 5 HKLRD 28, ¶135. [168] Reckitt & Colman Products Ltd v Borden Inc [1990] RPC 341, 406; Guccio Gucci v Gucci [2009] 5 HKLRD 28, ¶128. [169] Neutrogena Corporation & Anor v Golden Ltd & Anor [1996] RPC 473, 495 [170] Wadlow, The Law of Passing Off (4th edition), ¶4-011. [171] Hart v Relentless Records Ltd [2003] FSR 36, ¶¶62 – 63. [172] Exhibit DRK-11 annexed to the 1st Affidavit of Dennis Ray Knocke. [173] Submission of the Defendants, ¶18 [174] See, eg, Affidavit of Eric James Haynes, ¶16, and more pertinently, ¶¶20 – 25 which asserts that ittakes many months and a substantial effort and investment to introduce a product into a new market. | ||||||||||||||||||||||||||||||||
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