The Wellcome Foundation Ltd. v. Attorney General
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1. This is an appeal against the decision of Kaplan, J. J. who, on 4th March this year, made the following order:
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CACV000079A/1992
------------- Coram: Hon. Sir Derek Cons, V.P., Kempster & Litton, JJ.A. Date of hearing: 7th, 8th, 9th, 13th & 14th October 1992 Date of handing down judgments: 30th October 1992 ---------------------- J U D G M E N T ---------------------- Sir Derek Cons, V.P.: 1. This is an appeal against the decision of Kaplan, J. J. who, on 4th March this year, made the following order:
2. The authority for the order was, of course, Norwich Pharmacal Co. & Ors. v. Customs and Excise Commissioners [1974] AC 133. The judge referred to the well known passage in the speech of Lord Reid at p. 175 and then, having regard to the questions canvassed before him (and before this Court) to the comments on the following page:
3. I would refer also to the speech of Lord Cross at p. 199:
The plaintiffs, the Wellcome Foundation Limited ("Wellcome"), a company incorporated under the laws of England and Wales, are a wholly owned subsidiary of Wellcome Plc, likewise incorporated, and are said to be one of the largest pharmaceutical concerns in the world, being part of a substantial multi-national organisation with subsidiaries in 36 different countries and related companies in 3 more. These proceedings are concerned with a drug called "acyclovir", sold by them under the trade mark Zovirax, and a range of cosmetic products sold under the trade mark "Hazeline". 4. Wellcome have a distribution policy as set out in an affidavit by Mr. Stuart Adams, their Assistant Trade Marks Manager:
5. Acyclovir, a very successful product of Wellcome's research and development programme, is used extensively in the treatment of herpes, cold sores and other related infections. Wellcome hold a patent for it in the United Kingdom, which they have extended to Hong Kong pursuant to the Registration of Patents Ordinance, Cap. 42. It is manufactured at their own facilities in the United Kingdom and then sold to subsidiaries for marketing in different countries. In Hong Kong this is by Borroughs Wellcome & Co. (HK) Ltd. ("Wellcome (HK)") and in Portugal by Laboratorios Wellcome de Portugal Lda ("Wellcome Portugal"). In the latter case the Zovirax is made up in special packaging which indicates quite clearly that it is intended for the Portuguese market. 6. In late 1989 it came to the notice of Wellcome (HK) that generic acyclovir was available on the market in Hong Kong. A sample provided by a local doctor, on analysis by Wellcome's Research and Development Department, was found to be of inferior quality and contaminated by penicillin. In August 1991 another doctor provided what appeared to be a similar product. Investigation of a laboratory suspected as the probable source led nowhere. In the meantime what was genuine Zovirax, but originally destined for the Portuguese market, was found on sale in a number of dispensaries here. Accordingly Wellcome mounted a publicity campaign in the South China Morning Post and several Chinese newspapers, and despatched letters to some 800 dispensaries advising of their patent rights. However little, if any, success was achieved and in April 1991 it was again reported that some 10 dispensaries were still known to be dealing in Portuguese Zovirax, and more were suspected. (Investigations into several suspect laboratories again produced no result.) 7. By reason of regulation 36 of the Pharmacy and Poisons Regulations no pharmaceutical product or substance may be sold in Hong Kong unless that product or substance is registered with the Pharmacy and Poisons Board. A licence is also apparently required for its import. Enquiries to the Department of Health revealed that only Wellcome (HK) were registered to sell Zovirax/acyclovir, while the Trade Department replied that only Wellcome (HK) had been granted a licence to import for local consumption; but that another company had applied for an import licence covering Zovirax for the purpose of export. (We are told that the Trade Department also consulted its records with regard to acyclovir. It may therefore be safely assumed that no application for a licence was made in that respect.) However, following its usual practice the Trade Department declined to divulge the name of that other company without its consent, which presumably was not forthcoming. 8. It is common ground that the holder of a patent is free to dispose of his patented goods subject to any condition or restriction that he cares to impose, including of course a condition that they be not resold outside the territory of their original destination. It is also common ground that the unknown importer of the Portuguese Zovirax into Hong Kong would not be bound by any restrictions imposed by Wellcome through the Portuguese licence agreement or otherwise unless he had notice of them. Authorities referred to in this respect by Mr. Rogers, Q.C., who now appears for the Attorney General, and not disputed by Mr. Liao, Q.C., who has appeared throughout for Wellcome, are as follows:
Whether an alleged infringer has notice of the restrictions imposed by the patent holder is inevitably a question of fact which in the present instance is impossible of resolution to any significant extent; for without knowing the circumstances of the unknown importer, it is impossible to form a view of whether he could reasonably be expected to have been aware of the plaintiffs' rights, as Mr. Liao suggests he must, by reason of the publicity campaign mounted in November 1990 and the small size of the pharmaceutical trade in Hong Kong. 9. Alternatively it is suggested that the unknown importer is necessarily in breach of the plaintiffs' rights on the basic principle that nemo dat quod non habet. The submission, as I understand it, is that having regard to all the circumstances, including the Portuguese licence agreement, Wellcome's established distribution policy, strictly observed within its group of companies, and the packaging and accompanying leaflet of the Portuguese Zovirax, when Wellcome sold to Wellcome Portugal the Zovirax it had manufactured in the United Kingdom the transaction did not pass to Wellcome Portugal, as otherwise it would, any of the intellectual property rights owned by Wellcome (by reason of their patents in the U.K. and elsewhere) other than the rights which extended to Portugal. Thus when the unknown importer purchased from Wellcome Portugal, as it is presumed he or his predecessor in title did, he could have obtained no greater right, and in particular no right to deal with the goods in Hong Kong, than was held by Wellcome Portugal. The decision, it is said, is analogous to that in Societe Anonyme des Manufactures de Glaces v. Tilghman's Patent Sand Blast Company [1883] 25 Ch 1. Mr. Liao also referred to:
10. Mr. Rogers suggests that these cases are easily explained by a necessary distinction in the authorities between a patent holder who makes and sells the goods himself and a licensee who manufactures under licence, in which case only the extent of the licence is relevant for consideration. 11. It is conceded by Mr. Liao that an applicant for a Norwich Pharmaceutical order must show a prima facie case of infringement. For my part I would hesitate to attempt a precise definition of what that phrase means in this context, but clearly the case must not be hopeless or just trumped up for the sake of the application. Thoughts of American Cyanamid come naturally to mind. And Lord Cross refers to the strength of the applicant's case as one of the factors to be weighed in the balance. 12. As I have already said the question of notice cannot be satisfactorily answered at this stage and the alternative argument raises difficult questions of law which I would be reluctant to resolve in the absence of a party directly interested. In the circumstances it is not easy to assess the precise strength of Wellcome's case, but in the end I have come to the conclusion that there was sufficient in what they put before the judge below so that he would have been wrong to refuse the application, as Mr. Rogers suggests he should have, on that aspect alone. Nor am I persuaded that he erred in accepting that the plaintiffs could not reasonably be expected to have done more in other ways, or that he wrongly took into account the public interest in the quality of pharmaceuticals on sale in the territory; or that overall he was plainly wrong. 13. For these reasons I would dismiss the appeal in so far as it relates to the first two paragraphs of the order in question. In view of that conclusion I find it unnecessary, as did the judge below, to consider the position with regard to Zovirax as a trade mark. 14. The cosmetic products identified by the trade mark Hazeline and/or Hazeline Snow, referred to in paragraphs 3 and 4 of the order, are very popular in Southeast Asia, including China, Hong Kong and Macau, and are registered in Wellcome's name both here and, inter alia, in Indonesia. Wellcome's subsidiary in Indonesia (PTW Indonesia) is licensed to manufacture and distribute Hazeline products there, but is forbidden to supply such products outside that territory. Hazeline products for sale in Hong Kong, China and Macau come, or should come according to the various agreements, from Singapore. 15. In November 1990 it was discovered that Hazeline Snow manufactured in Indonesia was on sale in pharmacies concentrated in the Sheung Wan area. At the same time shops in the Border Gate area of Macau were found well stocked with similarly manufactured Hazeline products (and again in July 1991). It was also believed, by reason of a considerable fall in authorised sales to China, that Hazeline products were being smuggled there on a vast scale from Macau. It is unlikely that they had been openly imported because China imposes a duty of 300% on such products. There are no container port facilities in Macau, so it seems more than probable that all these goods were first imported into Hong Kong and then taken to Macau by lighter or barge. If that is so those involved would need a licence to import, and then export from Hong Kong, from the Commissioner of Customs and Excise (s. 17, Dutiable Commodities Ordinance, Cap. 109 and regulation 1A of the regulations made thereunder) and there would be other documents of the kind mentioned in the fourth paragraph of the judge's order. However, after some exchange of correspondence with solicitors acting for Wellcome, the Commissioner declined to give assistance on the ground that in the circumstances no trade mark infringement had been shown to have been committed and that disclosure "would or might impair or hamper the efficient conduct of (his) statutory duties". 16. It is conceded that the import or export of goods bearing the trade mark Hazeline or Hazeline Snow is in itself an infringement of the rights granted to Wellcome by s. 27(1) of the Trade Marks Ordinance, Cap. 43. The extensive argument before us was directed to the questions of whether the goods so imported were in effect Wellcome's own goods or whether in the circumstances Wellcome had impliedly given their consent to the use of the mark, in which case the unknown importers or exporters would have a good defence under subs. 3 of the same section. We were taken in respect of the first question through the cases of Aristoc Ltd. v. Rysta Ltd. [1962] RPC 65 and Champagne Heidsieck et Cie. Monopole Societe Anonyme v. Buxton [1930] 47 RPC 28 and in respect of the second to:
17. These cases together raise difficult questions of law which do not, as such, appear to me to concern the Commissioner of Customs and Excise. What does concern him however is the amount of time his staff would need to search for the information requested. In an affirmation dated 12th November 1991 Mr. Leung Koon Wah, an acting Assistant Superintendent in the Dutiable Commodities Administration of the Customs and Excise Department, estimated that such a search would take 987 man-days. He continued that:
18. He further explained that an award of costs would not help, for the Government's recruitment procedures, particular with regard to vetting and security checks, would make the temporary engagement to staff impracticable and would in any event still require considerable supervision. 19. Mr. Leung's estimate was based on all the records then within the department's possession, i.e. for the current and the previous 3 to 4 financial years. Later it was agreed that the search, if any was to be undertaken, should only commence from 1st January 1991 and then be limited to those documents now mentioned in the fourth paragraph of the order, together of course with the attached invoices where appropriate. Even so, dividing Mr. Leung's figure by 4, which would not seem inappropriate in the circumstances, still gives a figure of approximately 245 man-days.
20. With every respect to the judge, he failed to take into account Mr. Leung's evidence:
Wellcome possibly did not realise the extent of their request when it was first made, but in the light of Mr. Leung's evidence it seems to me that they are asking for more than can properly be expected, and for my part on this aspect alone I think that it would not be right to make an order. I would therefore allow the appeal to the extent of setting aside paragraphs 3 and 4 of the order in question. Kempster, J.A.: 21. I agree and have nothing to add. Litton, J.A.: Introduction 22. The proceedings, initiated by originating summons, are for discovery against two departments of government the Trade Department (paras. 1 and 2 of Kaplan J's order of 4 March 1992) and the Customs and Excise Department (paras. 3 and 4). Paras. 1 and 2 concern acyclovir/Zovirax, a pharmaceutical product. Paras. 3 and 4 relate to cosmetics: Hazeline and Hazeline Snow. Paras.1 and of the Judge's order 23. As regards acyclovir/Zovirax, the Trade Department, as indicated in its letter of 21 June 1991, already has the name (and probably also the address) of the company which had applied for import licences covering Zovirax, declaring that the licences were for the purpose of re-export. No search through its records was needed to comply with Kaplan J's order : that has already been done long before proceedings were initiated in September 1991. The Trade Department refused to provide the information as a matter of practice. Arguably, the importer of Zovirax has infringed Wellcome's patent : depending on whether he had notice of restrictions imposed by the patentee Wellcome in relation to the territorial limits for the sale of Zovirax by its subsidiaries. The exploration of that issue is plainly beyond the scope of the present proceedings, based solely upon affidavit evidence, where it was no part of the Attorney General's case to establish that the importer had notice. The Trade Department simply would not know, one way or the other. But, to the extent that the Trade Department has issued an import licence covering Zovirax to that importer, the Department might well have got itself "mixed up" in the tort of others, in the same way as the Commissioner of Customs and Excise did in Norwich Pharmacal [1974] A.C. 133 in relation to furazolidone. Paras. 3 and 4 of the Judge's Order 24. But orders 3 and 4, in relation to Hazeline and Hazeline Snow, stand on a rather different footing. No-one was able to say when Kaplan J made his order whether the Customs and Excise Department in fact had in its possession material sufficient to establish the identity of the alleged infringers of Wellcome's trade-mark. The position remains unchanged to this day. To get to the point of being able to say, yes or no, whether that Department had also got itself "mixed up" in the alleged torts of others, it must first examine tens of thousands of documents. These documents fall into the following categories:
25. Kaplan J's 3rd order is that "the Defendant do provide the Plaintiff with a list of the names of all persons .... other than [Wellcome (H.K.)] who, since 1st January 1991, have obtained a permit to import into or export out of Hong Kong any cosmetics identified by the trade-mark Hazeline and/or Hazeline Snow". The 4th order is in the same terms, but relate the removal permits and attached documents. 26. Although the orders, in terms, identify the products only by their English names, they must have been intended to encompass also documents in the possession of Customs and Excise where the information (if such exists) is given in Chinese, identifying the products by their Chinese names (夏士蓮) and (夏士蓮雪花膏). Practical Implications 27. Various estimates have been given for the amount of labour involved in going through the documents in order to comply with Kaplan J's order. These are, of course, mere estimates, and as such can be wrong.What is clear is that the present resources of the Customs and Excise Department do not permit such exercise to be done without considerable prejudice to their other responsibilities. The practical consequence of complying with the 3rd and 4th orders were not, in my view, sufficiently weighed by the judge. Nor did he consider the "knock-on" effect of such an order. If it be right in this instance to make such an order, then there will certainly be other patentees and trade-mark owners who would demand, as of right, the same facilities from the Customs and Excise Department : demands which the Department will plainly be unable to meet without a considerable expansion in personnel. How is the court to stem the flow, except by dismissing the applications of late-comers? Can such an approach be right in principle? Scope of Norwich Pharmacal 28. In my view, the 3rd and 4th orders are fundamentally wrong because they go way beyond the scope of Norwich Pharmacal [1974] AC 133. It may be helpful to recall Lord Morris' approach to the case at p.178 A.C. He said
29. In the present case, dealing as we are with "parallel imports", the alleged infringers could well have valid defences to the trade-mark infringements.
30. Here, Wellcome cannot assert as a fact that the Customs and Excise Department knows the names and addresses of infringers. All they can say is that if the Department went through the tens of thousands of documents dating back to 1 January 1991 in their possession, they might be able to identify some infringers. But, of course, the entire exercise could be in vain, yet that is what the Department would have to do to comply with the judge's order. This, as it seems to me, is no more than a "fishing request" by Wellcome : not, perhaps, precisely of the nature referred to by Lord Cross in Norwich Pharmacal at p.199-D, but equally objectionable; and it would indeed be a "thin end of the wedge", for once the Department is compelled to comply with Wellcome's request, similar requests by other trade-mark owners would be irresistible. 31. The law has long distinguished the position of parties to litigation (against whom extensive discovery orders can be made) and the situation of "mere witnesses". As to the latter the courts have been reluctant to subject them to the compulsive processes of law unless the interests of justice clearly so demands. See for instance Harrington v. N. London Polytechnic [1984] 1 W.L.R. 1293 at 1299 F-G:
32. That is the fundamental rule. Norwich Pharmacal provides an exception. If Kaplan J's 3rd and 4th orders were to be upheld, this court would have widened the relief available to would-be plaintiffs against innocent third parties well beyond the scope contemplated in 33. To test the correctness of this conclusion, suppose the following : that the plaintiff had taken out a subpoena ad testificandum directed to the Commissioner for Customs and Excise requiring him to testify in court, giving the names and addresses of all persons who, since 1 January 1991, had obtained import and export permits for Hazeline or Hazeline Snow. Without first going through the tens of thousands of documents in his possession relating to the import and export of cosmetics, the Commissioner would be totally unable to testify in the way required by the subpoena. Would it be right, then, for the court to use its powers in these circumstances and compel him to undertake this process so that he might (perhaps) be able to give the information as sought by the plaintiff? The answer, in my view, must be No. Authority for this is to be found in the judgment of Hunter J. in Hsin Chong Construction v. Hong Kong and Kowloon Wharf [1986] HKLR 987 where, following Senior v. Holdsworth [1976] 1 QB 23, a subpoena duces tecum was set aside as being oppressive. The subpoena required a witness to "bring.... and produce all files, papers, documents, notes, memoranda and other writings relating to or having a relevance or bearing to Phase III of the Harbour City Development". As to this Hunter J said at p.990-B:
34. This approach was rejected by Hunter J, and the subpoena in the Hsin Chong case was discharged. By parity of reasoning, the subpoena in the example I give above would, I suggest, have also been discharged. If a "mere witness" is not to be vexed in this way, why should the position be different if he were a defendant to a Norwich Pharmacal action for discovery? 35. For these reasons I too would discharge the 3rd and 4th paragraphs of the judge's order. Sir Derek Cons, V.P: 36. In handing down these judgments allowing the appeal to some extent we make an order nisi that the appellant shall have one half of his costs in this Court, the order as to costs below to stand.
Representation: Anthony Rogers, Q.C. & Ms. Lynda Shine, Crown Solicitor for defendant/appellant Andrew Liao, Q.C. & John Yan (M/s. Baker & McKenzie) for plaintiff/respondent |
Cases cited in this judgment