Wik Electro-hausgerate Gmbh & Co and Another v. Yamada Electric (HK) Co Ltd and Another

HCA001516/1981

Headnote

Injunction - Infringement of copyright and registered design - circumstances to be considered on granting injunctions - exclusive reputation & irreparable damage to plaintiffs' business.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Mayo, J.

Date of Judgment: 3rd July, 1981.

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DECISION

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1. This is an application for an ex parte injunction granted by Rhind J, on the 9th March 1981 to stand until the hearing of the trial of this action. At the conclusion of the hearing I informed the parties that I was ordering that the injunction should continue to remain in force until the trial and that I would be giving any reasons for this decision in writing.

2. The 1st plaintiff is a designer and manufacturer of domestic appliances in the Federal Republic of Germany and the 2nd plaintiff is an associated company. Both companies are owned by a Mr. and Mrs. Klaus Dorn. The defendants are manufacturers of hairdryers.

3. In June 1979 the plaintiffs entered into a contract with a Mr. G.K. Barnes on behalf of National Appliance Company of Illinois in the United States of America, (hereinafter referred to as NAC) for the sale of 250,000 units of a hair dryer which is the subject matter of the present proceedings. The 1st plaintiff has copy right in the drawings of the hair dryer and the rights conferred by U.K. Design Registration 988,356. The goods were to be marked with NAC's trademark 'Georgie'. Shipments of a small part of the hair dryers was effected but due to NAC's failure to open further letters of credit to finance the purchase, shipment of further hair dryers was discontinued in August 1980.

4. In January 1981 the plaintiffs became aware that NAC was selling an infringing hair dryer very similar to the plaintiff's model and subsequent investigations undertaken on behalf of the plaintiffs brought to light the fact that the alleged infringing models had been manufactured by the defendants. It is however significant that it would appear that the defendants only supplied NAC with hair dryers under one order. The present proceedings were commenced against the defendants in connection with this alleged infringement of the plaintiffs rights and the plaintiffs further claim that the defendants have been passing off these hair dryers.

5. I am satisfied, having examined a sample of the plaintiff's hair dryer and the model which it is claimed infringes the plaintiff's rights, that there is a triable issue in respect of the said infringements and the claim that the defendants are passing off the plaintiffs goods.

6. I also accept that the legal position concerning the granting of an interlocutory injunction is governed by the principals laid down in the case of American Cynamid & Ethico ⁽¹⁾. The Court must first be satisfied that there are triable issues. As I have indicated I am so satisfied. I must not however attempt to resolve conflicts on the affidavit evidence. Further to this, no matter how strong the plaintiff's case may appear to be an interlocutory injunction should not be granted pending the trial if the plaintiff can be adequately compensated by an award of damages and the defendants will be in a position to pay those damages. I would mention in this connection that both parties to this litigation are adequately financed and there is no reason to suppose that the defendants would be unable to pay any damages which may be awarded.

7. Mr. Rogers who represented the plaintiffs submitted to me that if I failed to grant the injunction irreparable damage would be caused to the plaintiffs' business. He said that the plaintiffs had expended about 9 months work on the design and preparation of the hair dryer which was recognized in the trade as being the plaintiffs model. In this connection the plaintiffs do not themselves have retail outlets and their reputation in the trade is a matter of importance to them. He argued that an exclusive reputation could not adequately be compensated for in damages and it is essential to preserve the exclusiveness. He cited the case of J.C. Penney Co. Incorporated & Anor. v. Penneys Ltd. and Anor.⁽²⁾. He also referred me to an affidavit of Mr. Dorn where he said that following the infringements he had received a number of complaints concerning the hair dryers being sold by NAC in the U.S.. The complaints arose as a result of the inferior quality of the infringing goods, notwithstanding the fact that the hair dryers bore NAC's 'Georgie' trademark. He specified various shortcomings in his affidavit and while I accept that I should not attempt to adjudicate upon the validity of the allegations made, I am equally satisfied that it would be wrong of me not to bear in mind the possibility that grave damage could be caused to the plaintiff's reputation if these allegations are true.

8. Another matter which Mr. Rogers drew attention to was that hair dryers are basically a fashionable article and designs such as those of the plaintiff's remained in fashion for a limited duration of time. Inevitable it would take a considerable time before the case would be tried and it was likely that by the time the action was disposed of the sales potential in relation to the hair dryers may well be limited. He also pointed out that the plaintiffs maintained a sizeable work force in their factory. If their market in hair dryers was to be reduced by other manufacturers being able to infringe their rights, with the advantage of not having to include in their costing of the product the expenses of designing and developing it, there was a definite risk that the plaintiff would be unable to maintain the jobs of all of his work force.

9. Mr. Kotewall who represented the defendants argued that I should discharge the injunction. He pointed out that the plaintiffs have never sold their hair dryers in Hong Kong and accordingly they had no reputation to save or protect in the Colony. He further argued that it had not been established that the plaintiff's hair dryer was either novel or distinctive. He submitted that it was necessary to establish this and cited as authority the case of Kemtron Properties Pty. Ltd. & Jimmy's Co. Ltd.⁽³⁾. He also pointed that the goods had always borne the 'Georgie' trademark and accordingly there could be no passing off. He also suggested that this met Mr. Roger's submission of exclusivity in the goods.

10. Further to this he had said that as the plaintiffs had not previously sold this hair dryer in the U.S. it was most unlikely that the buying public would be confused by the product. This however seems to overlook the fact that if I don't grant the injunction sought there would be nothing to prevent the defendants marketing the hairdryers in markets where the plaintiff sells them.

11. However if I understood him correctly, the main ground advanced by Mr. Kotewell in resisting the application was the fact that the plaintiffs could be adequately compensated by damages if the injunction was not granted. He pointed out that an interlocutory injunction is an exceptional remedy and it was clear from the American Cynamid case⁽¹⁾ that the plaintiffs would have to show that their losses can not be adequately compensated by damages if the injunction is not granted. He said that a real and tangible risk of such damage must be established. In support of this he cited the case of Unitex Ltd. and Union Texturing Co. Ltd.⁽⁴⁾. He argued that it would be a drastic step to take to stop the defendants right to manufacture in mid stream. The defendants had constructed moulds for the hair dryers and they would suffer substantial losses if they were not permitted to continue the manufacture of the articles. If at the trial it was held that there had been infringements of the plaintiff's rights they could be adequately compensated in damages.

12. Having considered all of the arguments which were advanced I am satisfied that the plaintiffs would be caused irreparable damage if I do not grant the injunction sought. Having examined the hair dryers and the designs of other hair dryers I accept that such articles are of a fashionable nature and if I do not grant the relief sought there is a real and tangible risk that the plaintiffs will not be able to obtain the fruits of their labours in developing their hair dryer. Even more important than this I accept that there would be a grave risk or jeopardy to the plaintiff's exclusive reputation in this field and this is something which must be protected as it would not be possible to adequately compensate the plaintiffs in damages if their reputation is called in question.

13. As against this I do not think that any substantial damage is likely to be suffered by the defendants by the granting of the injunction. As I have earlier stated, the order to NAC was a "one off" order and there is no suggestion that the defendant would be precluded from manufacturing other brands of hair dryer. Indeed the defendant does manufacture a number of different brands and their being prevented from producing the plaintiffs' design would not greatly affect their operations. For the reasons I have given I ordered that the injunction should continue to remain in effect until the trial of this action.

14. Costs will be in the cause.

Representation:

Mr. A.G. Rogers (J.S.M.) for Plaintiffs.

Mr. R.G. Kotewall (Deacons) for Defendants.

(1) 1975 2 WLR 316

(2) 1975 HKLR 598

(3) 1978 HKLR 455

(4) 1973 RPC 119