Rjp Electronics Ltd v. Far East United Electronics Ltd

HCA010952/1983

IN THE SUPREME COURT OF HONG LONG

HIGH COURT

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BETWEEN

Coram: Hon. Kempster, J.

Date: 14th September, 1983

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JUDGMENT

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1. On the 4th of August last the plaintiffs, who had already obtained possession of certain moulds which may well be vital to the defendants' production as will hereafter be described, secured an injunction ex-parte from Mr. Justice Barnes restraining the defendants from continuing to manufacture or sell one of their products, consisting of a ruler comprising a quartz clock and a detachable calculator, until the conclusion of the present inter-partes hearing. Needless to say the plaintiffs manufacture and sell a similar article. Pursuant to an undertaking given to Mr. Justice Barnes the plaintiffs issued a generally indorsed writ on the following day. They now ask the Court to grant similar interlocutory relief to run until the conclusion of the trial of the action which, with the best will in the world, may not take place for some 3 to 4 months.

2. As to passing off there are two telexes in evidence, one from Australia and the other from Europe, suggesting that the plaintiffs, who only started to manufacture and sell their product about a year ago, have already established a reputation for such articles. Indeed certain concerns have approached them for licences. The arrival of the defendants on the market has caused sane confusion.

3. As to the cause of action in infringement of copyright the plaintiffs deposed to the genesis of the relevant drawings w id in effect claim that these have been copied, by way of a 3 dimensional article by the defendants through adaptation of an infringing Taiwanese product referred to by Mr. Rogers, who appears for the plaintiffs, as "the missing link".

4. As to third cause of action in infringement of a registered design the plaintiffs invited the Court to look at their products which I do. They are beautified by a series of promotional symbols, drawings and names. The Court is also invited to accept the substantial novelty of the plaintiffs' products and to compare them with those of the defendants. It is conceded by Mr. Kotewall, who appears for the defendants, that the plaintiffs' design does differ from an earlier "Ronica" device and that there is a serious issue to be tried as between the parties.

5. I am not prepared to say on the evidence presently available that as regards any of the 3 causes of action relied upon the strength of the case of one of the parties to this litigation is markedly disproportionate to that of the others.

6. So I necessarily turn for guidance to American Cyanamid v. Ethicon⁽¹⁾ and in particular to the speech of Lord Diplock at page 408 in relation to the factors which should be taken into account in determining whether or not to accede to the plaintiffs' application or, differently expressed, to ascertain what factors should be weighed in the balance of convenience as between one party or the other.

7. The first question posed is this: Would damages adequately compensate the plaintiffs should they succeed at trial? It is accepted the defendants are good for any foreseeable amount of damages and they told me that they are prepared to keep records of their sales as, no doubt, they do in any event. This would provide a prima facie guide to the plaintiffs' loss of profits on sales. "But", says Mr. Rogers, "it is not so much with sales where damages are perhaps, ascertainable that the plaintiffs are concerned but with the disruption of their business"He says "They may be so Hard hit by competition, particularly by a slightly more sophisticated device, that their currently burgeoning sales for purposes of promotional schemes may so badly be affected that two new factories recently opened will Have to be closed, that workers will Have to be laid off and that a price war may result". As regards the disruption that may be caused to the plaintiffs and their marketing over the next 3 or 4 months I accept the submission that this is an element very difficult to be assessed in terms of dollars and cents. However, the two new factories are apparently operated by other companies and I Have some Hesitation in taking their fate into account. As regards the "price war", albeit currently the defendants appear to charge rather more for their more sophisticated device than the plaintiffs do for theirs, I think the likelihood of price competition is high.Further, I take into account that the.plaintiffs currently carry on a "one product" operation. They have elected to do this because of the profitability of the sales of  these ruler cum calculators. Nonetheless.having another important com-petitor in the market must be to the plaintiffs' disadvantage and adversely affect them in all sorts of ways which it is not easy to assess in monetary terms. Now on that footing damages will not the an adequate remedy for the plaintiffs so, following Lord Diplock, I have to consider whether, on the hypothesis that the defendants succeed at trial, the recovery of damages on the plaintiffs' cross-undertaking would adequately satisfy their losses. The ascertainment of those losses would involve an assessment by the Court of the effect of ceasing to take a share- albeit they started in this field relatively recently - in an obviously lucrative market.As for their lost sales an account of sales effected by the plaintiffs will not necessarily provide the Court with a guide. The defendants, on the other Hand, do not conduct a "one product" operation though this factor I consider discounted by the evidence which shows that the plaintiffs are skilled and inventive and they have elected for good reasons to employ all their resources on this product for the time being.I am satisfied that they are quite capable of turning their Hands to other products should business opportunity so dictate.In my view the defendants can not adequately be compensated on the cross-undertaking for the loss they would suffer if I grant the relief claimed today. So, on the footing that there is a loss not readily to,be.ascertained to be sustained by either party whichever course I take I look yet again to Lord Diplock's speech for guidance.He says, as Mr. Rogers quite rightly emphasises, that there are no.limits to the factors which the Court can take into.account and that it is inevitable that the party unsuccessful.today will suffer some disadvantage. I look back to see whether the plaintiffs are liable to suffer a greater disadvantage if I decline to grant them an injunction.or the defendants a greater disadvantage if I do. From this difficult balancing exercise I turn to the further advice:

"Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo".

Until recently it had been thought that the status quo was the situation prevailing until the party sought to be enjoined commenced the activity impugned.But this year in the case of Garden Cottage Foods Ltd. v. Milk Marketing Board⁽²⁾ at page 148 Lord Diplock set out to clarify this part of the speech which he had made 8 years previously. He said:

"The status quo is the existing state of affairs but since states of affairs do not remain static this raises the query: existing when? In my opinion, the relevant status quo to which reference was made in American Cyanamid is the state of affairs existing during the period immediately preceding. the issue of the writ claiming the permanent injunction or, if there be unreasonable delay between the issue of the writ and the motion for an interlocutory injunction, not I may say the case here, the period immediately preceding the motion".

Following that guidance the status quo for present purposes is that in which the plaintiffs were dominating the promotional market for ruler calculators comprising clocks; a market that they themselves had established in little over a year and which apparently they expect to exploit for another ten years. That seems to me, and I am not best informed on this point, to be along time during which to exploit an article for promotional purposes.  I have no doubt, however, on the evidence that the plaintiffs have orders that will keep their own factories and indeed their associated factories busy for several months. The status quoin relation to the defendants is a situation where they have entered the market having been warned earlier by the plaintiffs that legal proceedings might well result. I think the situation would be quite different had the defendants not entered this,particular market at all prior to issue of writ or application for interlocutory relief and I think the decisions in Beecham Group Ltd. v. Bristol Laboratories Proprietry Ltd.⁽³⁾ and Carroll v. Tornado Ltd⁽⁴) would then be strongly persuasive.

I have been fortunate to have cited to me a number of helpful authorities in particular Constable v. Clarkson,⁽⁵⁾ a case involving the moulds for wax candles in the shape of various kinds of fruit. At page 129 Lord Justice Brandon, as he then was, said in relation to damages:

"I have said earlier that I do not think the damages can wholly compensate either side if an injunction is granted or refused on certain hypotheses as to the outcome of the action.That is not to say that damages would be a wholly useless or ineffective remedy for the plaintiffs if no injunction were granted and they were to succeed in the action. There are various methods by which a calculation could be made of their financial loss and though it might not produce a complete answer yet it is in the nature of damages that they may not produce a complete answer to a party's loss.It does not seem to me in this case that the plaintiffs will necessarily suffer a great loss if they are left to their remedy in damages. They might not be wholly compensated but then plaintiffs in actions for damages quite often are not. The theory of the law is to provide complete restitution but the practice sometimes falls short of the theory".

Those words are singularly appropriate to the circumstances of the application now before this Court. In my view of the balance between the parties, the plaintiffs may well be able to recover by way of damages a substantial proportion of the loss they will suffer if no injunction is granted today. I feel less confident that the defendants would be able to recover by way of damages the loss that they would suffer if I did grant an injunction. Further, I consider that this is a proper case to preserve the status quo as now clarified by Lord Diplock. In the circumstances and upon the defendants' undertaking to keep an account of all sales of their ruler calculator until the hearing of this action there will be on order on the application. I shall certify this action fit for a speedy trial.

(1) (1975) A.C. 396

(2) (1933) 3 W.L.R. 143

(3) (1968) R.P.C. 301

(4) (1971) R.P.C. 401

(5) (1980) Fleet Street Report 123

Representation:

Mr. A. Rogers (King & Co.) for plaintiffs

Mr. Kotewall (Robin M. Bridge & Co.) for defendants