Arco Industries Ltd v. Durham Industries Inc and Another

HCA003430/1977

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: O'Connor, J.

Date of Judgment:

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JUDGMENT

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1. This is an application for an interlocutory injunction to prohibit the defendant infringing the plaintiff's registered designs in relation to a toy pistol and rifle. The principles for consideration on an application for interlocutory injunction are set out in American Cyanamid v. Ethicon Ltd. 1975 2 W.L.R. 316 and in J.C. Penney Co. v. Penneys Ltd. 1975 H.K.L.R. 598.

2. In American Cyanamid it is emphasised a number of times in the judgments that all the evidence was on affidavit and in conflict. In the instant case I have had benefit of oral evidence on each side and of hearing the witnesses under cross examination. Of course I have not heard all the evidence that may be given at the trial.

3. First matter for consideration is whether there is serious question to be tried.

4. In Henry Roach Petroleum Pty. Ltd. v. Credit House (Vic.) Pty. Ltd. 1976 V.R. 309 the judge said

" In order to determine whether there is a serious question to be tried it is necessary to consider what is the applicable law and whether there are arguable differences concerning it, what the facts are said to be on the opposing sides, and where the issues lie, and whether there is a tenable combination of the resolutions of the issues of law and fact upon which the plaintiffs could succeed."

5. The Australian courts have rejected the test laid down in the American Cyanamid case but I consider the passage I have quoted to be a good approach as to whether there is a serious question to be tried.

6. In respect of the pistol the registered design is effective from 22nd April 1974. There is evidence from the defendant's witness, which I consider will not be refuted, that there were pistols of similar design manufactured and marketed in Hong Kong as long ago as 1971. The plaintiff does not accept that but it is clear he recognises that such a finding is almost inevitable at the trial. The differences between the defendant's pistol and the plaintiff's pistol are greater than the differences between the plaintiff's pistol and the prior art, and the differences between plaintiff's pistol and the prior art are minor and insignificant. It seems clear that the plaintiff's registered design for the pistol is invalid due to prior publication and if it is valid there is no infringement by defendant's pistol. I find as regards the pistol there is no serious question to be tried as the plaintiff does not appear to have any real prospect of succeeding at trial.

7. The registration of the rifle design appears valid and it seems to me that there is a serious question to be tried as to infringement. The defendant went into production of the rifle with his eyes open to the extent that he knew of plaintiff's rifle and actually used a photograph of it in his promotional material. He having so used it, it comes ill from his mouth to contend that his product is not an infringement.

8. The next question is whether plaintiff could be adequately compensated by damages. He has given figures of his total sales turnover and has given figures of the number of sales of pistols and rifles. The periods largely overlap but are not identical. However taking those figures together with the price at which he sells the pistols and rifles it appears that the pistols and rifles between them account for about 15% of his turnover and that he sells almost two pistols to every rifle. Of course the rifles are the more expensive item. He says, no doubt truthfully that they to some extent attract sales of other items. In his affidavit he says that so far he has managed to retain all his major customers for these items, though he fears he will lose them if defendant not restrained. He says he would have difficulty in raising his prices from their present level which is artificially low due to defendant's competition, and by that he meant he would have difficulty in raising them even if he did not have competition from defendant. As regards any effect on his goodwill he has said that it is very easy to cause consternation to a customer and easy to stop his consternation.

9. It seems to me that if an injunction is not granted the assessment of damage to plaintiff is largely a matter of mathematical calculation. I don't consider he would suffer much damage if a nature that could not be easily quantified provided defendant kept accounts. The defendant can provide adequate guarantees that any damages awarded would be paid. That is really an end of the matter but I consider I should say something about whether if an injunction were granted the defendant could be adequately compensated by damages. It is clear that plaintiff would be a good mark for damages. However any assessment as to the loss defendant suffered would largely depend on an assessment of the sales he lost. Arriving at that figure would be largely conjectural. There is a difference of opinion as to whether or not in the event of an injunction being granted the defendant might find all his Walt Disney licences at risk, including those for items not the subject matter of these proceedings. The defendant's evidence on this matter is less than satisfactory but it is the plaintiff who has to establish he should get an injunction, and it seems to me that there may be a real risk that an injunction would result in defendant losing all his Walt Disney licences.

10. The defendant says that up to date he has shipped about 2,000 doz. rifles and has outstanding orders for about 20,000 dozen pistols and rifles. They constitute less than 5% of defendant's business. The defendant is just commencing to market the rifle and that would usually be a matter that would weigh in plaintiff's favour. However I think that I am entitled to keep in mind what I consider is a matter of common knowledge, namely that particular toys often come into fashion quickly and go out of fashion just as quickly. Despite the fact that pistols firing air filled balls seem to have been on market 5 years, and that the market for rifles firing air filled balls appears to be booming, I consider I can and should keep in mind that if an injunction is granted the defendant may miss the market completely in that by the time the action is tried these items may have gone out of fashion. I consider there is a serious risk that injury to defendant could not be adequately compensated by damages.

I consider that the order which is most likely to enable the trial judge to do justice between the parties is to refuse an interlocutory injunction.

Representation:

Costs Defendant's cost in cause.

Certificate for counsel.