Fossil, Inc. v. Trimset Ltd and Another
Read the full judgment text of HCA 2337/2000 on BabelCite. This High Court CFI judgment.
1. This is a copyright action in which the plaintiffs contend that they own the copyright in certain drawings from which they have commissioned the production and manufacture of what is called the Big Tic watch. This has become a major commercial success. It has sold better than any other model marketed by them before or since.
Cited by 8 cases
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HCA002337/2000 HCA2337/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO.2337 OF 2000 ---------------------
---------------------- Coram: Deputy High Court Judge Carlson in Court Dates of Hearing: 3-7, 10-14 and 17-21 March 2003 Date of Judgment (Handed down): 14 May 2003 ------------------------- J U D G M E N T ------------------------- INTRODUCTION 1.This is a copyright action in which the plaintiffs contend that they own the copyright in certain drawings from which they have commissioned the production and manufacture of what is called the Big Tic watch. This has become a major commercial success. It has sold better than any other model marketed by them before or since. 2.The plaintiffs are a company based just outside Dallas, Texas which is in a substantial way of business. They sell many models of popular or "fashion" watch designed by their team of designers in Dallas who number more than 100. Additionally, they have subsidiary companies, one of which is Trylink Limited ("Trylink") in Hong Kong who also employ designers to work on the plaintiff's design projects. 3.The 1st defendants ("the Defendants"), although considerably smaller than the plaintiffs are a well-established watch trading company based at Kwun Tong. They employ a small design team to create designs which they eventually develop into a finished product either by using outside manufacturers or by assembling the various parts ordered by them at their own workshop. They sell watches worldwide, some of which bear the names of household brands such as Adidas and DNKY. There is nothing to suggest that they are anything but a perfectly respectable watch company who exhibit their stock at major trade fairs such as the one at Basel, Switzerland and at the International Watch Fair here in Hong Kong. As traders they are open to approaches for ready-made watches from manufacturers who are looking to sell their products. This case comes about from one such arrangement. The 2nd defendants, who have already submitted to judgment are watch traders and manufactures. They showed the Defendants a watch, which they wished to sell, that is similar in general appearance and concept to the plaintiff's Big Tic. The plaintiffs say that the 2nd defendants were the manufacturers of this watch but the Defendants make no admissions about this and contend that there is no evidence that the 2nd defendants were the manufacturers. For the purposes of this introductory narrative that does not matter but I will have to return to this issue presently. Upon being shown samples of the 2nd defendants' watch, the Defendants thought that this might appeal to their European customers and ordered a quantity of them which they sold to a German department store as well as to a Florida watch distributor. 4.The Big Tic watch design is said by the plaintiffs to be innovative and, at the time of its launch on the market, unique. It comprises a display which is completely taken up by ticking digital seconds. The arabic numerals occupy the whole of the display and change every second from "00" to "59". Superimposed onto the display are analogue minute and hour hands. The Defendants' watch has an identical format, although there are differences in the size and shape of the ticking second digits. The analogue hands are virtually identical, which is not especially surprising because analogue hands of varying sizes and shapes are readily available "off the peg" from the many manufacturers of such items. Both watches also use the same battery driven movement manufactured by Citizen. SCHEME OF THE JUDGMENT 5.This trial has taken 15 days. I have heard from 15 witnesses including one by live video link from Texas. Mr Yan for the plaintiff and Mr Stephenson on behalf of the defendants, both of whom know much about these matters, have conducted their respective cases with great skill and their assistance, particularly on the law, has been exceptionally helpful. I am grateful to both of them. 6.Whilst I must endeavour to keep this judgment as short as is reasonably possible, the demands of the case require that I should investigate certain parts of the evidence in a little detail as well as demonstrating a proper application of the relevant legal principles to the facts as found by me. In such circumstances it would be helpful if, at the outset, I indicated how I propose to divide up the judgment. 7.There are four major issues which require determination by me. These have been correctly identified by Mr Yan as follows :
If all of these are resolved in the plaintiffs' favour they would be entitled to the various remedies claimed in the Statement of Claim, although at this stage I am only asked to grant the injunctions and adjourn, for assessment, the claims for damages. 8.It would assist if I begin by stating, in outline, the legal principles which apply to this matter. To an experienced copyright lawyer, this might be said to be basic and Mr Yan in particular has been very careful in the course of a 2 1/2-day opening to draw these principles to my attention. His assistance has been such that I am now able to concisely distill those principles in respect of each of the four issues which I must come to a decision on. For his part Mr Stephenson, whilst not necessarily seeking to suggest that what Mr Yan has said on the law is wrong, has submitted that in terms of the law, the case needs to be approached differently and I will therefore be required to set out in due course what Mr Stephenson's submissions amount to. 9.Thereafter, I will need to refer to the evidence in the case as it bears on these issues and to arrive at reasoned findings of fact on that evidence. 10.The last major element of the judgment on the issue of liability will require me to apply the relevant legal principles to the facts as found by me. THE LAW When does copyright subsist? 11.A convenient starting point is the Copyright Ordinance ("the Ordinance") itself which describes the matters that the law will protect and give effect to. The relevant parts of section 2 are as follows :
Section 5 describes artistic works thus :
In order to qualify for copyright protection the author needs to satisfy the following by virtue of section 177(1) :
Section 178(1) is as follows :
12.The first matter that emerges from the authorities is that for "copyright" to subsist the artistic work to which it is said to attach must be "original". "Original" refers to the original skill or labour that is employed in executing the work. The thought, in its abstract sense, is not protected by copyright but only the physical manifestation of that thought in its physical form, in this instance the drawings which were the product of that "thought". "Original" does not mean that the thought is novel or inventive in the sense that it has never been done before. It was expressed in this way by Peterson J. in University of London Press Limited v. University Tutorial Press Limited [1916] 2 CH 601, 608-609 :
The requirement is that the work must emanate from the author in the sense that it must not be copied from another work, although it may be classified as "original" even though use has been made of existing material. The locus classicus is contained in the judgment of the eminent American copyright judge Story J. in Emerson v. Davies [1845] 3 Story's US Rep 768, 778 as follows :
These same sentiments appear in the speech of Lord Atkinson in Macmillan & Company Limited v. Cooper [1924] 40 TLR 186, 188 :
What one gets from these cases is that if use is made of already existing material, copyright will subsist if there is some element of material alteration or embellishment. What one looks for is the quality of the material alteration rather than the number of alterations. Regard will be had to the work as a whole and if the author has expended sufficient independent skill and labour in the substance of the material alterations to what may have been copied from existing material that would be sufficient to bring about copyright protection. Ultimately it is a question of fact and degree to be determined on the facts on the particular case. How does one become the owner of copyright in artistic works? 13.The author of a particular piece of work usually becomes the first owner of the copyright. In the very common situation of an artistic drawing made by an employee in the course of his employment the employer will become the first owner of the copyright. Authority for these propositions is to be found in sections 13 and 14 of the Ordinance which I need not recite here. I should also observe that copyright can also pass from one person or company to another by assignment which is dealt with in detail in section 101 of the Ordinance. What is an infringing copyright of a copyright work? 14.What constitutes an infringing copy is set out in the following sections of the Ordinance, the material parts of which for the purposes of this action are as follows : Section 22 :
Section 23 :
Section 35 :
15.Mr Yan suggests that these statutory provisions require two questions to be asked. Firstly, did the maker of the alleged infringing copy, directly or indirectly, copy the copyright work, and secondly, if the answer to the first question is yes, was a substantial part of the copyright work copied? These being essentially matters of fact and degree to the answered with reference to the evidence. 16.To prove copying it is submitted that the plaintiff needs to prove four matters. It must be shown that there is a similarity between the work about which copyright is asserted and the article or work which is said to infringe it. In order to do that, the plaintiff will need to show that the Defendant had access to the copyright work or the finished product made from the copyright work which has provided the opportunity to copy. If that is shown to be so, a prima facie case will have been made out which will call for an answer by the Defendant. These requirements are to be found in Copinger 7-15 to 7-17, a brief and partial recitation of which will suffice :
The leading authority on this aspect of copying and proof of access is the House of Lord's decision in LB Plastics Limited v. Swish Products Limited [1979] FSR 145; see the speeches of Lord Wilberforce at page 149 and of Lord Hailsham at 155-156. 17.Once a case of copying has prima facie been established, the court is then required go on and decide whether the Defendant has copied a substantial part of the plaintiff's work. In pursuing this examination of the evidence, it is no longer relevant to consider whether the two works look alike which is part of the exercise which would have already been undertaken by the court in deciding whether there had been copying. On substantiality, the court is not concerned to examine the matter by examining the respects in which the two works are different. A finding of copying having been made the examination is now directed to seeing whether the features that have been copied form a substantial part of the plaintiff's copyright work. Guidance on this aspect is to be found in the recent and important House of Lord's decision in Designers Guild v. Russell Williams (Textiles) Limited [2001] FSR 113 from which Mr Yan extracts four propositions which he states in the following way :
Ways in which acts of infringement may be committed 18.The plaintiff will need to demonstrate that the Defendant has committed acts of infringement. In this regard, sections 24, 30 and 31 of the Ordinance are relevant. Section 24 which in its material parts is as follows, relates to acts of primary infringement :
19.In relation to acts of primary infringement proof of the commission of the acts complained of is sufficient to constitute an infringement. There is no requirement cast on the plaintiff to show that the Defendant knew that he was infringing copyright. This is discussed more fully in Copinger at 7-105 to 7-108. 20.Another form of infringement is described as secondary infringement which requires proof that the Defendant knew and had reason to believe that he was dealing in or with an article which was an infringing copy. Actual or constructive knowledge will be sufficient. This type of infringement is caught by sections 30 and 31 of the Ordinance. Section 30 refers to the importing or exporting of an infringing copy and this in these terms :
21.Section 31 describes infringements by the possession of or dealing with infringing copies. Its material parts are these :
22.The discussion in Copinger at 8-10 to 8-15 and the Supplement thereto shows that turning a blind eye can be considered actual knowledge and that a defendant will also be held to have actual knowledge if he knew the relevant facts but acted under a mistaken view of the law or was ignorant of its effect, even if acting on the basis of legal advice which, on subsequent analysis, is held to have been erroneous. As will be seen in due course the plaintiffs here allege primary infringement, but if they fail to show this, secondary infringement is relied on where the evidence is said to support both actual and constructive knowledge. 23.These then are the legal elements which are relied upon by the plaintiff to which the evidence must now be attached. The defendants have adopted a different approach to the legal position which will in due course require careful consideration. In order to understand their case, it would be more helpful to hold over the legal defences raised by Mr Stephenson to when I summarise the evidential basis which they contend for. THE EVIDENCE 24.The evidence which is said by the plaintiffs to support the legal ingredients of the case, which I have just described in the preceding paragraphs, must now be identified. Mr Yan has sought to analyse this in great detail and at length - that analysis appears in the note to his final speech which I have been able to refer to in identifying what is relied on by him. Mr Stephenson has, sensibly I think, not attempted such a review, contenting himself with a commentary on the relevant parts of the evidence which he submits is important and which he says demonstrate the falsity of the claim and how copyright is not the appropriate forum for this dispute. Given this fundamental difference in the parties' cases, I propose to set out the plaintiffs' evidential basis for their case, whilst at the same time placing alongside that version what the defendants' witnesses have had to say about the plaintiff's case which they have sought to engage and deny, or at least have attempted to explain away. 25.One needs to start with the drawings themselves upon which the plaintiffs rely. These are at A29-35 attached to the Statement of Claim and further produced elsewhere in the bundles as part of the witnesses' evidence. Reliance is placed on the evidence of Mr Bruneau who produced the first hand-drawn sketch showing the basic concept of the digital seconds with superimposed analogue hands. The genesis of these designs is said to come from brainstorming meetings held in Dallas by the plaintiffs' design team under the leadership of Mr Bland, their chief designer. What they had set out to do in particular, was to improve on their "DIRT" model, a watch which combined digital and analogue features. This was in October 1997. Further meetings were held in Dallas from 17-19 November 1997 which involved Mr Ryan To ("Mr To"), a significant witness in this case, who is employed by the plaintiffs' Hong Kong subsidiary Trylink Limited. An important part of the evidence has been a notebook which Mr To kept. It is really a diary of his work, setting out projects that he was involved in at any particular time. It sets out agendas for discussion, decisions made and so forth. In effect it speaks for itself, although Mr Stephenson has suggested that in many respects, it does not provide an accurate record of what had taken place. The November discussions in Dallas were directed to developing the "CINDY" module LCD 004. These meetings are referred to in Mr To's notebook under the heading "November Trip" and appear in bundle C1 between pages 419 and 434. At this early stage, this is the only written record of these discussions. Mr Stephenson's case is, in part, that the plaintiffs have in fact manufactured this action by a process of "reverse engineering" of the evidence, if I can borrow an expression of his in another context. His case being that it was not until early 1998 when the plaintiffs had got a sight of the Seiko Volcano watch and essentially borrowed its concept of ticking digital seconds that they began to put their own watch design together. He has submitted that it is remarkable, that if such Dallas-based discussions had taken place, no formal minutes of preliminary designs or even "doodles" or sketches were not preserved. Mr Bland has explained that because nothing formal had been decided on at that stage, any notes that were made were not kept. The only record is Mr To's notebook. For this reason, Mr Stephenson has sought to attack the integrity of Mr To's notes because they provide the only written and purportedly contemporaneous record of any meeting. Subsequent to this meeting and after Mr To had returned to Hong Kong, Mr Bland had further design meetings with Mr Bruneau and other designers. In the course of one of these discussions with ideas and concepts going to and fro, Mr Bruneau says that he came up with the first rough sketch of what was to become Big Tic, E(1)96 showing the seconds in the background at "59" and the analogue hands superimposed. It was this almost "child-like" drawing, and I do not intend to be deliberately pejorative about it in giving this description, which got the ball rolling from which further technical designs were made which eventually led to the finished product. Not surprisingly, Mr Stephenson has much to say about this sketch. Mr Bruneau says that the concept came to him as a result of his discussions with his colleagues and fellow designers. This and his own abilities as a designer resulted in the sketch. He had not referred to anything else. A key feature of the defendants' case is that the Big Tic is no more than a "knockoff" based on the Volcano watch which first came to public attention in January 1998 some two months after the Bruneau's sketch. What Mr Stephenson says gives the lie to all of this evidence about the November 1997 discussions and sketches is that somehow Mr Bruneau in doing his sketch put in "59" as the digital seconds which is precisely the figures shown in the promotion materials for the Volcano in early 1998. He has even gone into the mathematical probabilities of Mr Bruneau just happening to hit on "59" in his sketch quite independently of the Volcano advertisement. He says the chances of this happening by accident are so remote that I can safely discount accident - which leaves me with the only other sensible explanation which is that the plaintiffs must have seen this promotional material, liked the idea of large ticking digital seconds on the display taking up effectively the whole of display and then doing something, which is not especially clever or innovative, by adding analogue hands over the seconds display, which combination of analogue and digital is in any event old hat - it having been done by watch makers on innumerable occasions previously. 26.That, of course, is an attractive submission given the absence of any written minutes or other notes from Dallas in 1997 when the project was apparently being discussed and the remarkable coincidence of the "59" seconds. Undeterred by this, Mr Yan has pointed out the meticulous way in which the Bruneau sketch has been evolved through sketches and drawings by Mr Ho and then Miss Brooke Mudd whose evidence I have taken by video-link. The lack of early documentation from Dallas is explained on the basis that at that stage, November/December 1997, the idea for the Big Tic was still in its infancy and once it had developed sufficiently by February 1998 it had applied to it a formal project number, F.98:077. There can be no doubt that as from January 1998, the design elements of the project are well-documented. The module which was to be used was being seriously discussed, reference being made to the CINDY/DIRT module which was then rejected because it was not thin enough. There are e-mails to that effect passing between Messrs To and Bruneau [C(1)434-417]. Mr To then engaged Sweda, a watch manufacturer used by Trylink previously, to see how the module and the watch were to be assembled. Between 16 and 17 January 1998, the plaintiffs' international executives from Italy and Germany went to Dallas when they were shown the concept and expressed themselves enthusiastic as to its potential. Following this international meeting, Miss Mudd was asked to produce artwork for the watch display [E(1)30]. There can be no doubt that on these aspects of the developmental stages of the watch, the plaintiffs' evidence has been most impressive. Mr Ho in Hong Kong became further involved at this time and Mr Bland and Mr Bruneau flew over to Hong Kong for further consultations with the team from Trylink led by Mr To. Miss Mudd's drawings were sent to Sweda (Mr Martin Ko) as well Mr Ho's drawings which are also to be found in Sweda's own file for this project and also in Mr Ho's computer CD archives. The significance of Mr Ho's evidence about his Mackintosh computer CD archive is that once the file in that archive has been dated, the date cannot subsequently be changed. This evidence was led by Mr Yan to counter the suggestion that it was open to the plaintiffs to rewrite this part of the history of the case by changing the dates in order to fit in with the account that they wished to provide for the development of the watch for the purpose to pre-dating their own initial ideas to give the appearance that they had formed the initial concept before the appearance of the Volcano watch on the market in early 1998. 27.It is convenient at this stage to interpose the Volcano watch's relevance to this case. It has been exhibited in the case and there are numerous photographs of it in the papers as well as technical drawings and details of its dimensions. It was designed for Seiko by an Italian designer known for his innovative and bold designs. Superficially, it is nothing like the Big Tic or the defendants' watch in terms of its overall shape and appearance. The case is conical and high sided giving the appearance of a volcano crater. The similarity only comes from the second digital display. Whatever one says about the obvious differences between the shapes of the three watches, there is no doubt that the concept of the Volcano's digital display bears a distinct similarity to the other two watches. Of course there are differences, in terms of the shapes of the digits and the extent of the overall coverage of the display by those digits, but the Volcano concept is plain to see in the other two watches. 28.Mr Bland's evidence is that his only interest in the Volcano was not the fact that it was a watch with large ticking seconds - the concept had already been independently arrived at by his design team in Dallas, but in discovering the means by which the plaintiffs' watch might achieve the effect of having the digits extend to the very edge of the display. So far as he was concerned, this was a crucial requirement which was not being achieved with the square modules used in their DIRT models. He obtained a Volcano, took it apart and realised that Seiko was able to do this by using an octagonal shaped module which enabled that effect to be achieved. This for him was the breakthrough that he was looking for and this was all that he and his team took from Volcano. Thereafter, the watch was developed with the Citizen 2026 model octagonal module. 29.There has been much "discussion" in the evidence and in counsel's speeches concerning the use made of Volcano by the plaintiffs. The defence has played this hard. Mr Stephenson, who has really had to make bricks without straw in the conduct of much of his case, has propounded the concept of "reverse engineering" by seeking to demonstrate through cross-examination of Mr To, in particular, that what the plaintiffs have in fact done is to take the Volcano apart and in effect copy what they wanted from it in terms of measurements and technical specificationsthis regard, much has been made of the fact that the measurements of the . In second digits of the Volcano are identical to those of the Big Tic. The suggestion here being that these measurements were taken from the photograph, part of the advertising material, of the and that in Mr To's notebook there are a number of measurements referred to which Volcano look suspiciously like those which have been borrowed from Volcano. This has involved Mr Stephenson in a certain amount of theorising as to how this may have come about, which he has carefully set out in his written submissions. In describing it as theory, I am bound to say as he must recognise, that he has no concrete evidence to support such submissions. The basis of it is the astounding coincidence, as he would describe it, concerning the "59" digits in the Volcano advertisement and Mr Bruneau's first sketch and the identical dimensions of the digits. As to dimensions, it is right to say that he has fallen short, because it is quite clear, particularly from Miss Mudd's evidence where she was able to carry out computerised measurements as she gave her evidence from Texas, to show that the dimensions of the digits are not identical, although they are close. The fact that they are close does not really assist Mr Stephenson because, as one might expect, with an article such as a watch with a similar outlook and concept, measurements are likely to be closely matched. The point is that they are not identical - so that point rather goes and it also has the effect of undermining Ms Cheung's evidence (she being the defendants principal witness) on this issue where she was really forced to adjust her testimony in order to try and deal with what Miss Mudd had previously said. 30.On Volcano therefore Mr Stephenson is really only left with the "59" coincidence to which I must return in due course. 31.As February 1998 progressed, the evidence has very clearly demonstrated the evolution of the designs by Mr Ho and by Miss Mudd. Designs that were "honed" to the point that they could be sent to the manufacturer for production of the finished product. On this aspect, if I may say so, Mr Yan's marshalling of the evidence has been most impressive. Every aspect of the evolution of the final product has been identified, involving the plaintiffs' employees, Trylink and Sweda who finally put it altogether. Under some challenge from Mr Stephenson as to his being able to produce a complete account of his instructions in this matter, which seems to have bruised his amour propre, Mr Paul So of Sweda was able to find, during the overnight adjournment, all the drawings for the watch which now form a separate bundle of the evidence. 32.In a sense, all of this later evidence, although important in the chain of production, is perhaps less significant than the earlier evidence of Mr Bruneau, Mr Bland, Miss Mudd, Mr Ho and Mr To as to how this all started. It is after all these initial drawings which gave birth to Big Tic and which this action now seeks to protect. It needs to be remembered that it is the drawings that this case is all about rather than the finished article which is the product of those drawings. 33.On this aspect of the case, the defendants are not able to mount an evidential challenge by calling direct evidence to contradict what has been said by the plaintiffs' witnesses. Mr Stephenson has been left to rely on the points that he has made on Volcano but before I indicate my findings on this aspect of the case, I propose to conclude my review of all the evidence. 34.Following the assignment of a project number for Big Tic on 27 February 1998, the watch moved on apace. As I have already observed Mr So has put into evidence all the drawings for the component parts of the module and Sweda having placed its order with various suppliers for these parts. This was in early March 1998. In April, Miss Mudd prepared final drawings of the watch cases and of the dials. These were of a final type referred to as "mechanicals'" which would go to the manufacturer. Miss Mudd has given a very full account of her involvement in this matter and produced all of the drawings that she made at the various stages of that process. What she has prepared is also available in Trylink's file of this case as well as the CD archive that she prepared. The significance of this being that, according to the plaintiffs, there is no question that these drawings were prepared other than on the dates that Miss Mudd has told me about. No point can be taken, says Mr Yan, that dates of drawings have been "doctored" to suit a particular timetable or agenda in order to cover up any suggestion that Big Tic had only been put together once a decision had been made by Mr Bland and those in Dallas to copy Volcano's big ticking digits and merely super-impose analogue hands in order to corner the market on this concept as if it were new and unique. Thereafter, again in April 1998, five samples of the watch were ready and taken to Dallas by Mr To for final approval, following which production was commissioned resulting in the exceptional popularity of the model which had generated a very high volume of sales. Big Tic according to Mr Shroff, the plaintiffs' top man in Hong Kong, has been a resounding success. 35.In describing the process by which the watch has been designed and ultimately manufactured, I have been able to take a short course by giving a general overview of the evidence. This evidence has been recorded in all of the drawings that the plaintiffs' witnesses have produced. Discussions as to how this matter has progressed appear in the e-mail exchanges between Hong Kong and Dallas and in Mr To's notebook. The witnesses have also come to speak to those materials and have been cross-examined on them. 36.The next phase of the plaintiffs' evidence, to which I need to refer, concerns the way in which the plaintiffs came to learn of the Defendants' watch and the way in which they set about gathering evidence with the view to proving a breach of copyright and obtaining the various remedies from the court including the interlocutory injunctions which are now in place. 37.The Big Tic was launched on the market in late 1998. Ms Cheung, the Defendants' director and main witness, had said that she first saw the Big Tic as an exhibit at the Hong Kong Watch and Clock Fair in 1998. She became aware of its particular features. In 1999, the Defendants having purchased their own ticking seconds watch from the 2nd defendant made their sales to Karstadt and Oko. Once the plaintiffs learned of the existence of the Defendants' watch at Karstadt who also sold the Big Tic at its stores in Germany they began the process of clamping down on these watches. Letters were written to Karstadt warning it to stop selling the Defendants' watches. Karstadt were entirely cooperative and helpful. They stopped their sales of the Defendants' watch and provided information which led the plaintiffs to both defendants. Private investigators were sent to the Defendants' premises in Hong Kong to produce evidence of sales by them. The investigator posed as a buyer acting for a Mexican company which was interested in purchasing a number of watches for that market. There is no issue about this evidence although Mr Stephenson has complained of unfairly slanted questions being addressed to the Defendants' staff. That may, to a certain extent, be true, but of course the purpose of these questions was to elicit evidence of sales of these watches and if possible, knowledge that there was a breach of copyright of the Big Tic. At the end of the day, this evidence, whilst potentially controversial, has not been the subject of any real challenge. The Defendants accept that it has made sales of its watch abroad and its employee had described to the investigator knowledge of potential copyright problems at the time of these events, although not accepting that the Defendants had been guilty of breach of the plaintiffs' copyright. 38.In January 2000, the plaintiffs' previous solicitors formally wrote to the Defendants pointing out the allegations of breach of copyright and requiring cessation of sales, notwithstanding which, no undertaking to that effect was forthcoming from the Defendants. Eventually, the matter came before Chung J. An interlocutory injunction was agreed to on the Defendants' behalf. The letter before action in January 2000 is also relied on by Mr Yan as providing knowledge of breach of copyright by the defendant although that, he submits must be the very latest date or occasion when knowledge can be attributed to the Defendants. The plaintiffs' primary case on knowledge goes back to September 1998 at the Watch Fair when Ms Cheung accepts that she first became aware of it. 39.Mr Shroff has given evidence that the plaintiffs have brought many actions to protect their claim to copyright. Other Defendants and many potential Defendants have submitted to judgment or voluntarily acceded to the plaintiffs' demands that they "cease and desist". The 2nd defendants have also done so. Mr Stephenson, quite rightly, submits that this cannot assist the plaintiffs against his clients. They must prove their case independently. The fact that others may have capitulated cannot prove the case against these defendants. Those other parties were just as likely to be pliant to the plaintiffs' demands for purely commercial reasons which suited their circumstances. To this extent, Mr Stephenson must be right. 40.The last aspect of the plaintiffs' evidence which I need to mention concerns the experts. Both sides have called design specialists of varied experience. I propose to deal with the expert evidence called on both sides at the same time. Quite reasonably it might be thought that in a case such as this expert evidence would have been crucial guiding the judge to the correct conclusion he having to decide which of the experts he accepts and which he rejects. In this matter, this body of evidence is of marginal value. All of them have spoken of design concepts, the ideas which motivate the designer to a particular expression of his art from the paper stage through to the finish product, whatever that may be. All have looked at Big Tic, the Defendants' ticking seconds watch compared and contrasted them and done the same with Big Tic and Volcano. In terms of design, I am in just as good a position to draw my own conclusions by looking at the watches myself, which I have done on a daily basis during the trial and now for the preparation of the judgment. Whilst it would have been imprudent of either party not to call a design expert, in the event, I have come to the view that I would have been able to reach the conclusions that I have on these three watches without their assistance and I say that without intending any disrespect to any of these witnesses. There has been nothing particularly esoteric or technical about this evidence and certainly nothing more than the human eye could not tell the layman. 41.Professor Lee, the main defence witness, has made valiant efforts to bring out differences between the two "protagonist" watches. He has spoken of how the Defendants' watch differs from the plaintiffs' in style it being a more sporty watch, more sturdy in its construction and to differences in the shape of the watch case. The plaintiffs' watch, he says, is more of a smart casual variety perhaps more dressy, which would appeal to a different, older more sophisticated type of person. He has also spoken of the shape of the ticking second digits, their respective sizes and appearance and generally drawn attention to the differences between the two watches. Such differences, as have been referred to by Professor Lee, are plain enough. The plaintiffs' case is not that the watches are identical. In due course, the law must provide the answers when I come to apply it to this part of the evidence. Suffice it to say, at the decisive moment, I must concern myself with the similarities rather than the differences, provided I first come to a conclusion that there has been a prima facie case of copying. As to the Volcano, the only possible sense in which there might have been copying must relate to the display and the ticking seconds to which I will also need to make reference. 42.From this I come to the Defendants' evidence. On the facts, in the sense of positive evidence as to how the Defendants have come to acquire and sell their watch, their only witness has been Miss Cheung, one of its shareholders and main directors. She has been in the watch business for many years now and I suspect is one of the many examples of enterprising people in Hong Kong who have started from the bottom and through hard work and application have built up a successful business in a field in which Hong Kong has a very strong worldwide reputation. There is very little about watches that she does not know starting from basic design through to production and marketing. Whilst this case has something of a David and Goliath feel about it, Miss Cheung has stood her ground resolutely. I have found her to be a straightforward witness who, given her experience, is very knowledgeable and who has been basically dependable in terms of her frankness when giving her evidence. 43.As I have already indicated, the Defendants' case has suffered because much of its case on contradicting the plaintiffs' witnesses as to the design and evolution of the original designs has been dependent on trying to show the plaintiffs' case to be intrinsically unreliable rather than putting something positive of its own alongside that of the plaintiffs' case. 44.Miss Cheung has put in drawings from designers employed by the defendant to show just how a particular watch design is built up through a series of drawings. This was to support the submission that when a watch design is attempted and before it develops to the production stage, there are a series of proper hand-drawn designs and sketches that are preserved and which come before a technical feasibility study is made. This is contrasted by Mr Stephenson with the plaintiffs' evolution of Big Tic. All that has been preserved is Mr Bruneau's very rough and ready sketch and nothing else before one gets to Mr Ho's and Miss Mudd's graphic designs. The purpose of this submission to cast doubt on the dates which are put forward by the plaintiffs that start as early as October 1997. This sketch, says Mr Stephenson, is no more than an ex post facto attempt to put back the clock to before Volcano came to anyone's notice. A crude attempt to say that Big Tic is an original creation of the people in Dallas when in truth they had decided to build on Volcano from sometime in about January 1998 when they saw it and liked its large ticking seconds. This I will return to shortly. 45.Miss Cheung's evidence has also referred to how the defendants' watch came to be purchased by them and sold to Germany and Florida. None of this is in issue. She also says that the 2nd defendants had indicated that they had manufactured the watch. She assumed therefore that they had the copyright in the designs for it. They were afterall a reputable company. Other than Miss Cheung's evidence that someone from the 2nd defendants had told her that they were the manufacturers of the watch, there is no evidence in any direct sense to show that. This has given rise to whether Miss Cheung's anecdotal statement is a sufficient proof of whether the 2nd defendant was the manufacturer with the consequence that if the plaintiffs prove breach of copyright against the Defendants, they may only be able to prove a case of secondary infringement requiring, as it does, proof of knowledge by the Defendants. To this matter, I must also return presently. 46.The shape of the case on the evidence, with the plaintiff calling a comprehensive array of witnesses to prove the full range of its case from the birth of the idea of Big Tic in Dallas through to its production and the alleged infringement of its asserted copyright in the drawings, has meant that their evidence has occupied most of the trial. Whilst, of course, I must have regard to all of the defendants' evidence the parts of it that matter, in terms of the issues that call for a decision by me, has been rather restricted. Miss Cheung's evidence has been by far and away the most significant, but even she has only been able to give a limited amount of direct evidence on the issues that I need to decide. 47.From that review of what I perceive to be the salient parts of the evidence, I now turn to my decision as to what evidence I accept and what I reject. It would assist if I make these findings in relation to each of the issues which I need to determine. These issues have already been identified by me at the start of the judgment. Does copyright subsist in the drawings? 48.This has provided one of the main sources of dispute in the trial. The Defendants, having decided that the plaintiffs have done no more than "copy" the Volcano and just added analogue hands to their watch, have taken on the burden of seeking to demonstrate that the drawings, which are the subject of the action, cannot be said to be "original...artistic works", all of this already having been achieved by the designer of the Volcano. It is with this in mind, in particular, that much of Mr Stephenson's cross-examination of the plaintiffs' witnesses has been concerned with. He has taken on that burden without the assistance of any evidence of his own to set against that of the plaintiffs' witnesses. Having regard to all of the evidence on this issue, I am entirely satisfied that all of these drawings are original in the sense contemplated in sections 2(1)(a), 5, 177(1) and 178(1) of the Ordinance. Given the challenge facing him, which is apparent on the pleadings, Mr Yan has called what, in my view, has been an impressive body of evidence to show the evolution of Big Tic from that very basic sketch by Mr Bruneau, through the designs by Miss Mudd and Mr Ho and the management of all of that material by Mr To of Trylink and Mr So at Sweda under the overall direction of Mr Bland. I have not lost sight of the point that there is not very much that the plaintiffs have been able to show in terms of notes, memoranda, sketches or drawings before early 1998. I accept Miss Cheung's evidence that one frequently sees the build up of a particular design in the way that she has been able to show me by a series of hand-drawn sketches which are usually preserved. Nevertheless, I also accept the evidence of Mr Bland and, indeed of Mr Bruneau, that in the Autumn of 1997 when this particular matter was being discussed by them and when it was still in its embryonic stage, nothing in particular was preserved simply because, at that stage, there was no need to do so. 49.However, what has caused me to pause is the apparent coincidence of the "59" appearing in Mr Bruneau's sketch and in the Volcano advertising material in early 1998. Mr Stephenson has asked me to place that "coincidence" alongside the accepted lack of other sketches and the documentation immediately before and after the time when this particular drawing was made by Mr Bruneau. Against that, Mr Yan submits that what is really being suggested here is a wholesale conspiracy of lies by a number of the plaintiffs' staff who have given evidence to manufacture a case that this was all original, going back from about October 1997, when the truth of the matter is that this all really started in early 1998 when the Volcano came to everybody's notice and the plaintiffs decided to jump onto that band wagon. Much of the Defendants' case has, rightly in my view, been described as theory by Mr Yan which, he submits, is completely unsupported by any hard evidence. 50.Having regard to all of the evidence, called in the case, affecting as it does the overall credibility of the plaintiffs' witnesses, I am completely satisfied that these drawings are original. Mr Bruneau who, I am bound to say, impressed me as an entirely honest and straightforward individual, says that "59" is the particular number that he decided to draw on the sketch. His mind took his hands to those particular numbers. Where he has persuaded me of the truth of this part of his evidence, I am entirely comfortable with the notion that his "59" and the Volcano's advertising material "59" is no more than a coincidence. I also accept the reasons given by Mr Bland and Mr Bruneau as to why in the Autumn of 1997, no sketches or notes were preserved by them. It seems to me to be entirely reasonable that where the matter had yet to crystallise in any concrete way that such paperwork would not have been preserved. In arriving at this conclusion, I have been much assisted by the contents of Mr To's notebook which gives a real contemporaneous feel about all of the plaintiffs' evidence on the timing and development of this project. The e-mail communications also assist me in that conclusion although, as Mr Stephenson rightly points out, these records only start from early 1998, but the overall effect of these two important parts of the evidence provides a sense of reality going back to the previous autumn. I cannot imagine having seen these witnesses and having listened to their evidence and to the way which they gave it that they would have got together to create a false case of the type suggested by the Defendants. The detail of the designs by Mr Ho and Miss Mudd that followed on from Mr Bruneau's sketch add to my sense of reassurance. In my judgment therefore, the plaintiffs have amply demonstrated that copyright does indeed subsist in the Bruneau's sketch and the subsequent drawings identified in the Statement of Claim. Is the plaintiff the owner of such copyright? 51.I have no difficult in resolving this issue in the plaintiffs' favour. This is essentially a matter of law dealt with in sections 13, 14 and 101(1) of the Ordinance to which I have already drawn attention. As to the Bruneau's sketch and Miss Mudd's drawings, both of them were employees of the plaintiff at the time that they made their drawings which they did in the course of their employment. That being the case, the plaintiff owns the copyright of drawings made by them. So far as Mr Ho is concerned, he was employed by Fossil (East) Limited and he made his drawings in the course of his employment for that company. Accordingly, Fossil (East) Limited became the first owner of the copyright in Mr Ho's drawings. Fossil (East) Limited and the plaintiffs had agreed between them that copyright in these drawings should belong to the plaintiff and I have, in evidence, a Deed of Assignment in writing entered into between these two companies on 30 March 2001 which puts the matter beyond doubt. Notwithstanding that evidence, Mr Stephenson has sought to challenge this matter by submitting that there is a certain lack of clarity as to who the proper owner of the copyright might be and has suggested that perhaps Trylink or even Sweda might be the owners rather than the plaintiffs. For the reasons that I have just given, I take the view that there is nothing in those arguments. Is the defendant's watch an infringing copy of the plaintiffs' copyright works? 52.This, in terms of impacting on the final outcome of the action, is the overwhelmingly important issue that I need to decide. I do not have the advantage of being able to compare the drawings from which the Defendants' watch was produced because, of course, the Defendants were not the manufacturers and so I need to look at the Defendants' finished product, the plaintiffs' Big Tic and, of course, the copyright drawings themselves. 53.I have already set out the legal requirements which the plaintiff would need to demonstrate in order to succeed under this part of the case which I do not propose to repeat here. 54.The first matter relied upon by Mr Yan is what he calls a striking general similarity between the two finished products which provides him with a basis for saying that the Defendants' watch has been substantially copied from what had appeared in the plaintiffs' drawings. There is no doubt, in my mind, that both watches draw on the identical concept. These are, for the sake of repetition only, large ticking seconds occupying the major part of the display with analogue hands superimposed. There are, of course, a number of differences and Professor Lee, in particular, I think, was able to articulate these better than any of the expert witnesses. In the final analysis, I do not believe that these differences can in any sense detract from the overall presentation of the two watches, the dominant features of which are the large ticking seconds with the analogue hands. At this point, it is useful to say something more about Volcano if only to eliminate it from the case. Clearly both of these watches employ the concept of the large ticking seconds but there the similarity begins and ends. The really dominant feature of the Volcano is, as its name suggests, the volcano-shaped case. That is what immediately catches the eye. The overall impression of the Volcano is that of a "gimmicky" product driven by the effect created by the design of the case more than the time keeping features that one encounters once one has looked through the watch face into the depths of what lies below the surface. Whilst the similarities of the Volcano's ticking seconds and the identical general concept employed by Big Tic as to the ticking seconds are broadly similar, the superimposed analogue hands provide a marked difference. I do not think it is sufficient for Mr Stephenson to dismiss the importance of analogue hands in considering the overall effect. And so, in so far as it may be necessary, I find that Big Tic is certainly not a copy of Volcano by any stretch of imagination. 55.That having been said of Big Tic vis-à-vis Volcano, I am satisfied that the same cannot be said of the Defendants' watch. Whilst I have noted all the differences which Mr Stephenson and indeed the witnesses upon whose evidence he relies for his submissions, these differences cannot detract from the overwhelming case that the Defendants' watch is substantially a copy of Big Tic which has, of course, come from the drawings to which copyright attaches. It is quite clear to me that the manufacturer of the Defendants' watch must have had access to Big Tic which had appeared at the Watch Fair in September 1998, liked the look of the concept employed by the plaintiffs and from that produced the Defendants' version with all its similarities plain to see. Have the defendants committed acts which constituted acts of infringement? 56.Where the first three issues have all been decided in the plaintiffs' favour, I now come to the ultimate determinative issue. As is apparent from my review of the law as to the means of infringement, there are two kinds which can be relied upon by a plaintiff in such an action. 57.If it can be shown that the defendant has committed acts of primary infringement, the mere commission of the acts itself would constitute infringement, there being no requirement to show proof of knowledge by the defendant that it was aware of the plaintiff's copyright. In order to get home on an allegation of primary infringement, the plaintiff would be required to show that the defendant is at the head of the distribution chain. What is meant by that is that the defendant had purchased from the manufacturer and then in turn has sold the product on. In respect of this latter aspect, there is absolutely no doubt, because of course the Defendants' own case is that they sold this watch in some quantities to the German department store and to the Florida watch distributor. Such acts would amount to acts of primary infringement not requiring any knowledge of the plaintiffs' copyright provided, and this is the substantial proviso, that the plaintiffs have proved that the defendant purchased from the manufacturer, allegedly the 2nd defendant. The only evidence of this comes from Miss Cheung herself who was told by the 2nd defendant's representative that the 2nd defendant was the manufacturer. A little surprisingly, the plaintiffs have not taken any steps to obtain more direct evidence of that fact. Not surprisingly, Mr Stephenson has seized on this aspect of the evidence and submits that hearsay evidence of this type is simply not sufficient to prove the fact of manufacture by the 2nd defendant. He suggests that all this amounts to is evidence that it might have been said, but certainly not evidence as to the truth of the contents of that statement, which is a perfectly reasonable point for him to take. This being a civil matter, the Evidence Ordinance allows the admission of hearsay evidence in a very generous way. It would appear that the Defendants were prepared to accept this statement and indeed proceeded on the basis that the 2nd defendant was the manufacturer. Given the generous latitude allowed as to the admissibility of hearsay evidence I am, firstly, disposed to admit it and in terms of the weight that I am prepared to attach to it I am disposed to hold in all the circumstances, that what the 2nd defendant was telling the Defendants was the truth of this matter. I cannot discover any reason why they might not be telling the truth on a matter such as this. Whilst I appreciate that it is not for the Defendants to disprove the truth of such a statement clearly, it would have been open to them to take steps to do that, but in the absence of anything in the evidence as it presently exists, I am disposed to accept that statement made by the 2nd defendant's representative as true. Consequently, the mere, admitted, act of selling on these watches by the Defendants would constitute primary infringement of the plaintiffs' copyright. 58.Even if I were wrong about that, particularly in the way that I have felt able to treat the out-of-court statement by the representatives of the 2nd defendant to the effect that the 2nd defendant was the manufacturer of the watch as providing sufficient evidence of that fact, it seems to me that the plaintiffs have amply demonstrated, on a balance of probabilities, that the Defendants have also been guilty of acts of secondary infringement by having shown the requisite degree of knowledge, either actual or constructive, of the plaintiffs' copyright. In this regard, Miss Cheung has said that she felt confident that the manufacturer of her watch had the copyright in its drawings. 59.On the question of knowledge, Mr Yan puts it in two ways. He has submitted that the crucial date is January 2000 when the plaintiffs' previous solicitors wrote to the Defendants, expressly putting them on notice as to the plaintiffs' claim to copyright, notwithstanding which, the Defendants continued to deal with their version of the watch in the way in which Miss Cheung has admitted. I find as a fact that this correspondence clearly provided the defendants with the requisite degree of knowledge which, together with the selling of the watch, would amount to secondary infringement, and that is a specific finding that I make on the evidence. Mr Yan also makes the evidentially more difficult submission that even before the correspondence the evidence is sufficient to fix the Defendants with knowledge of the plaintiffs' copyright based on essentially three pieces of evidence. Firstly, Miss Cheung has said that she was aware of Big Tic from September 1998 when she saw it at the Watch Fair. Secondly, that there was no watch like Big Tic prior to her having seen it at the Watch Fair. There are, of course, a number of examples in the evidence of similar watches but these come well after these dates in September 1998. And lastly, that she must have been aware that in preparation for the production of watches, drawings must have been made which would attract copyright. By way of summary, Mr Yan pulls these points together by drawing attention to the distinct similarity between the two watches, which he says, entitles him to submit that all these features, in combination, provide overwhelming evidence of knowledge on the part of the Defendants. If he were to fail at this level, then, as I have already found, he says the issue is beyond doubt following the correspondence from Lovell's in January 2000. Whilst I recognise the force of Mr Yan's submission based on the pre-January 2000 evidence, I have come to the view that it falls short of showing knowledge, actual or constructive, leaving the plaintiff to succeed on secondary infringement only after January 2000. 60.This would be the fall-back position for the plaintiffs where I have already found primary infringement on the basis that the 2nd defendant was the manufacture and that this defendant was therefore at the head of the distribution chain having purchased from the manufacturer and sold on. THE DEFENDANTS' APPROACH TO THE CASE 61.Where I have found the facts in the plaintiffs' favour for the reasons that I have attempted to give, it seems to me that I am still required to go on and consider some matters raised by Mr Stephenson where he has sought to take a radically different approach to this case. 62.His primary contention, which he made clear in opening this matter, has been that this is really a patent case rather than a copyright matter. He submits that it is not right, by merely attaching analogue hands to what is in essence the Volcano digital display, for the plaintiffs to tie up a simple design concept for the length of time contemplated by section 17(2) of the Ordinance, life plus 50 years when the proper approach is under the Patents Ordinance which would require the patents registry to examine the invention and then to give it true monopoly for the lesser period provided under section 39(1) of the Patents Ordinance. He submits that the plaintiffs realised this and have indeed made patent applications in a number of jurisdictions. He has also gone as far as submitting that copyright protection should really only extend to the type of counterfeit cases which one finds in places like Temple Street Market. 63.Mr Yan has submitted that what lies behind Mr Stephenson's submissions in this regard is a failure to recognise both the creative and inventive efforts which have gone into the making of Big Tic. The law recognizes an overlap between the two jurisdictions whereby a patent can be applied for whilst at the same time the law will provide copyright protection. Whilst Mr Yan has felt it necessary to go into an almost philosophical analysis of the reasoning which underlies the policy of the legislation under both copyright and patent law, I do not need to embark down back particular road. 64.It seems to me that the drawings and designs, which are the subject matter of this action, clearly fall within the scope of protection afforded by the Copyright Ordinance. Equally, there is also scope for the issue of a patent, which has happened in this case. That is sufficient to dispose of Mr Stephenson's alternative contention although, of course, he has very sensibly sought to deploy evidence, in so far as he has been able to, and arguments in respect of the claim framed as it is in copyright. SUMMARY 65.In view of the findings of fact on the evidence, I can now take a short course in applying those facts to the law governing in this claim.
Remedies 66.As I have indicated at the outset of this judgment, at this stage I am only invited to grant the plaintiffs the injunctions asked for in paragraphs 1(1), (3); 2 and 3 of the Re-Re-Re Amended Statement of Claim which, in my judgment, the plaintiff is now entitled to having regard to the terms of my judgment. I shall also adjourn the claim for damages and an account to chambers. 67.I would have thought that, inevitably, in a matter such of this, costs should follow the event and, accordingly, the plaintiffs must have their costs, to be taxed on a party-and-party basis. As this judgment is being handed down, this order will be an order nisi in the usual way. I will also give the parties liberty to apply as to the wording, effect and implementation of these orders. 68.Before I leave this, I would wish to make one short observation now that this part of the matter is over, which is that the Defendants have, unfortunately, elected to adopt an extremely high risk strategy in defending this case where others have opted for a safer course and that this has been done on precious little evidence leaving Mr Stephenson with the unenviable task of, as I have already observed, having to make bricks without straw.
Representation: Mr John Yan, instructed by Messrs Baker & McKenzie, for the Plaintiff Mr Paul Stephenson, instructed by Messrs Wong & Chan, for the 1st Defendant |
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