H&M Hennes & Mauritz Gbc Ab v. Zoetop Business Co Ltd and Others

HCIP 31/2021

[2023] HKCFI 2329

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 31 OF 2021

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DECISION

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1.This is the Plaintiff’s application for leave to appeal against my order dated 2 May 2023 (“the Order”) granting the 1^st and 2^nd Defendants unconditional leave to defend the Plaintiff’s copyright infringement claim.

2.The background of this case and the reasons for my decision have been fully set out in my written Judgment dated 2 May 2023 (“the Judgment”) and I do not want to repeat the same here.  For the purpose of this Decision, I adopt the same abbreviations that I used in the Judgment.

3.The main issue in this appeal is about my decision on triable issue relating to primary infringement under s 24 of the CO.  In §§14 and 15 of the Judgment, I said the following:

“14. Mr Li Jun (“Li”), the Manager of the 1^st Defendant, has provided an account in §§9 to 11 of his affirmation as to how the 1^st Defendants had sourced the alleged infringing products from its suppliers. As the previous acts of putting into circulation of copies cover acts both in Hong Kong and elsewhere, there is certainly a triable issue that it was the Defendants’ suppliers who first put the alleged infringing goods into circulation and not the Defendants. Indeed, s 24(3) makes it clear that the “issue of copies of the work to the public” does not, for the purpose of s 24, cover any subsequent distribution or sale of those copies or importation of those copies into Hong Kong.

15. It may be right for Mr Clark to say that it was the Defendants who first put into circulation the alleged infringing goods in Hong Kong, but since the previous acts of putting into circulation could occur in places outside Hong Kong, the first putting of the alleged infringing goods into circulation in Hong Kong does not assist the Plaintiff’s case. Hence, there is a triable issue as to whether there was primary infringement contrary to s 24.”

4.In making such decision, I focused on the affirmation of Li which led me to believe that the business model of the 1^st Defendant, like many other cases in this court, was something like an e-commerce platform sourcing the goods from their suppliers (“the Suppliers”) and selling them to their customers through the internet.  However, in this application for leave to appeal, Mr Clark, solicitor advocate for the Plaintiff, submits that the Defendants had actually operated with their own brand name.  They sourced the goods from the Suppliers, put their brand name on the goods and sold them to their customers by reference to their own brand name.  Hence, it was the Defendants who first put into circulation the alleged infringing goods in either Hong Kong or elsewhere.

5.In reply, Ms Ma, counsel for the Defendants, argues that the 1^st Defendant was only one of the buyers of the alleged infringing goods supplied by the Suppliers.  She refers me to Clause 6.2 of a particular contract made between one of the Suppliers (i.e. 永康市尚彤服飾有限公司) and the 1^st Defendant, which provided for a “lowest-price” guarantee for the goods supplied by this particular supplier.  Such price guarantee clause suggests that the 1^st Defendant was only one of the buyers for the goods supplied by this particular supplier.  If the Suppliers sold the alleged infringing goods to various buyers, then it must be the Suppliers and not the 1^st Defendant who first put the alleged infringing goods into circulation in the market, with the result that the 1^st Defendant cannot be found guilty of primary infringement under s 24.

6.The issue turns on the business model operated by the 1^st Defendant at the material times.  In the substantive hearing before myself, I do not think that the parties had fully addressed me on this issue.  I must confess that, when I made the decision on this particular issue, I took what Li said in his affirmation as the 1^st Defendant running some kind of e-commerce platform.  I have not addressed the particular fact that the 1^st Defendant was selling the alleged infringing goods using its own brand name, which may indicate that it was the 1^st Defendant which first put the goods into circulation in the market.  As I may have made a mistake about the mode of operation of the 1^st Defendant’s business, the Plaintiff may have a reasonable chance of success in overturning my decision on triable issue relating to primary infringement under s 24.  On this particular ground alone, I should grant the Plaintiff leave to appeal against the Order at least against the 1^st Defendant.

7.I agree that, based on the evidence at this stage, it is unclear whether the Suppliers had supplied the alleged infringing goods only to the 1^st Defendant or whether the Suppliers had previously circulated the alleged goods in the market or sold the goods to other customers.  However, since it is the burden on the defendant in an O 14 application to establish an arguable defence with sufficient supporting particulars, it is arguable that, if the Defendants were to rely on the defence that it was not the Defendants who first circulated the alleged infringing goods in the market, the Defendants should have made it clear to the court that they were relying on such defence and supply the court with the necessary particulars.  After all, the 1^st Defendant’s mode of business operation is something within its own knowledge.  If the Defendants are seeking to rely on such particular defence, they should bear the burden of establishing at least an arguable case in this regard.

8.Obviously, the Defendants are also relying on other grounds to oppose the O 14 application:

(i)    There are certain defects in the Plaintiff’s case and the 2^nd affirmation of Sundelius made pursuant to s 121 of the CO, which cast doubt on the Plaintiff’s claim on copyright ownership and subsistence.[1]

(ii)   There is doubt as to whether the alleged infringing goods were copies of the Plaintiff’s copyright works.  As the Plaintiff has not provided any information about the dates of publication of its works, the Plaintiff has not proved that the Defendants or the Suppliers had access to the Plaintiff’s works thereby providing the opportunity of copying.[2]

(iii)  The Plaintiff’s claim is not actionable in Hong Kong as: (a) the alleged infringing photographs were uploaded in the Mainland; (b) the servers of “shein.com” and those websites under complaint, which targeted overseas customers, were not located in Hong Kong; and (c) most of the websites and the Apps were not targeting the public in Hong Kong.[3]

9.I have not dealt with these arguments in any great details in the Judgment.  However, I doubt whether these arguments alone are sufficient to raise a triable issue on the Plaintiff’s claim.  As I see it, the objections taken against the s 121 affirmation are rather technical in nature, which may not be sufficient to cast doubt on the truthfulness of the s 121 affirmation.[4] In respect of the second argument, as there are striking similarities between the Plaintiff’s copyright works and the alleged infringing goods, the present case could only be the Suppliers copying the Plaintiff’s works or the Plaintiff copying the design of the goods supplied by the Supplier.  The Plaintiff has produced some evidence about the independent creation of the Plaintiff’s copyright works, but similar evidence is lacking on the Defendants’ side.  Under such circumstances, the Defendants have failed to establish an arguable case that it was the Plaintiff which copied the 1^st Defendant’s goods.  On the actionability issue, Hong Kong customers are certainly one of the targets of the Defendants’ website and Apps.  Even if the server might not be located in Hong Kong, the Plaintiff should have no great difficulty in establishing that the Plaintiff’s claim is actionable in Hong Kong.

10.For these reasons, there is a chance that the Plaintiff may obtain summary judgment if the appellate court overturns my decision relating to primary infringement under s 24.   Hence, leave to appeal should be granted to the Plaintiff to appeal against the Order in respect of the claim against the 1^st Defendant. 

11.For the claim against the 2^nd Defendant, I have already explained in §§32 to 34 of the Judgment as to why there is a triable issue as to whether the 2^nd Defendant, being only the registrant of the websites or the developer of the Apps, is liable together with the 1^st Defendant as joint tortfeasor.  I do not find that there is any substance in Mr Clark’s submissions which can disturb my decision in this regard.

12.For the above reasons, I only grant the leave to appeal against the Order in respect of the claim against the 1^st Defendant and dismiss the same application for the claim against the 2^nd Defendant.   I also make a costs order nisi that the costs of this application be costs in the cause of the appeal vis-à-vis the Plaintiff and the 1^st Defendant and be to the 2^nd Defendant vis-à-vis the Plaintiff and the 2^nd Defendant, which shall be made absolute 14 days after the date of the handing down of this Decision.