Nin Jiom Medicine Manufactory (Hong Kong) Ltd v. Wai Kong Yiu t/a Chai Tin Sow Medicine Factory Ant Another

HCA011494/1996

HEADNOTE

In an application for an interlocutory injunction based on get-up, the Defendants conceded that the Plaintiff was entitled to some relief in respect of sale in Hong Kong which had only just commenced. The Defendants contended however, that there had been manufacture of the product in Hong Kong and sale in the People's Republic of China for some 3 1/2 years and that any relief should be subject to a proviso to permit continuation of manufacture for sale to China.

Held:

There should be no proviso permitting manufacture. The Defendants would have no control over their products after sale and hence could not stop them coming back into Hong Kong.

In the absence of proof that the Defendants had a legitimate trade to protect it would be wrong to make a proviso to an injunction. In the circumstances the only Defence put forward to a claim for an injunction as final relief at trial was one of delay. That seemed to have little or no prospect of success.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: The Hon. Mr. Justice Rogers in Chambers

Date of Hearing: 25th November 1996

Date of Delivery of Decision: 25th November 1996

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DECISION

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1. In this Action, the Plaintiff is the manufacturer of a well-known cough medicine which I shall refer to as "Pei Pa Koa". The Plaintiff has been in existence for some years and it is of a substantial size. It is virtually a one-product company. The Plaintiff's sales figures both in Hong Kong and in the People's Republic are impressive. For example, in 1995 to 1996 the Hong Kong sales figures were over $36 million and in the People's Republic of China they have reached $107 million. This is no small feat when one considers that even at the sales price of approximately $15.00 a bottle of cough medicine, that can represent a substantial figure to someone in the People's Republic. The sales in the People's Republic have gone from about $210,000.00 in 1982 and have increased year on year apart from a slight dip in about 1990 through to the present sales figures.

2. The Plaintiff's product is sold in a distinctive packaging. One might describe it, perhaps, as being slightly old-fashioned but it is really traditional because when compared with other packaging, one can see that it is not in fact old-fashioned but it is, as I say, traditional. It has a background pattern which consists of what at first glance might look like medallions but in fact are combinations of Chinese characters in a more or less stylistic form and these have been registered as trade marks. Then on each side of the box are different depictions that are normally contained in rectangular boxes. It is difficult to describe the packaging satisfactorily. However, I am certain that it is an easily recognised packaging. The Plaintiff sells the product widely in Hong Kong. It is available not only in traditional medicine stores but also in what would be open-shelf stores, for example, supermarkets and some of the chains of retail chemists.

3. The Plaintiff has for some time been bedevilled by imitations of its product and imitations of its packaging. This has occurred, for example, in the People's Republic of China. The People's Republic of China, of course, registers trade marks and the Plaintiff's trade marks and name are, I understand, registered in China and they have been able to stop the sale and distribution of those products which incorporate their trade marks. The Plaintiff, however, in 1994 became aware of a product which is manufactured by the 1st Defendant. The packaging of one of the samples which the Plaintiff obtained in 1994 has been exhibited.

4. It is not altogether clear to me from looking at the packaging, including the bar code, that this product was necessarily manufactured in Hong Kong. It may possibly be that the 1st Defendant's name itself, Chai Tin Sow Medicine Factory, would give that away but I am not convinced of that. One thing that I am convinced about, however, is that anybody who looks at that would at once be confused in to thinking that it might be the Plaintiff's product. The Defendants have filed evidence saying that not even a moron in a hurry would be confused. I should only say, as politely as I can, that that is probably adventurous advocacy at its best. It is unnecessary for me to describe the Defendant's product since that can best be seen from looking at it but there are so many features which look so similar, to my eye at any rate, to the Plaintiff's product that I have no doubt that anybody seeing it in a shop would be confused. He or she might easily pick it up thinking it was the Plaintiff's or having seen the Plaintiff's side by side for some reason make a mistake when he took it and may never be aware of the mistake he has made. The Plaintiff's evidence shows that they attempted to make a complaint about this in the People's Republic back in 1994 but were told that because the trade marks used on that product were not the same as the Plaintiff's that they could not do anything about it. So the matter rested.

5. The Defendants' evidence shows that this product has in fact been on sale in the People's Republic for some 3 1/2 years. I have to say that the sales figures of the Defendants' product are nothing like the Plaintiff's. The comparative figures show that there were sales in 1993-4 of some $3.7 million. However, there seems to have been a big drop in the Defendants' sales in 1994-5 to something over $1 million creeping up again in 1995-6 to $1.8 million and so far this year there has been an increase up to September of sales of $2.7 million.

6. However, there has been a slight change, apparently, in the packaging which the Defendants have used in the People's Republic. One of the changes has come about because the 2nd Defendant has now, since March of this year, become the distributor of the 1st Defendant's products in China and Hong Kong and that has caused a further yellow rectangular box to be printed at the bottom of the front panel. There has also been a slight alteration to the extent that the 1st Defendant now puts on its packaging its name "Chai Tin Sow" in black characters at the top of the centre panel on the front of the box whereas before it used golden characters "Sai Yeung Sum". However, this change, to my mind, again is not particularly significant because it is the overall look of the packaging which, to my mind, is so noticeable and impressive.

7. The Plaintiff next became aware of the 1st Defendant's product in September of this year when it became apparent that the 1st Defendant was now marketing its product in Hong Kong and it seems to be accepted that that only took place in about September of this year. This was accompanied by a certain amount of advertising and point of sales advertising which was the matter which drew the product to the Plaintiff's attention again. As a result of that, the Plaintiff consulted its trade mark agent in Hong Kong and matters then took their course. A letter was written on the Plaintiff's behalf to the Defendants which met with a rebuff and this was followed then by the commencement of this Action.

8. Up until the filing of the Defendants' evidence, it appeared that the Defendants were disposed to defend the application for an interlocutory injunction to prevent further distribution of the packaging complained of. But with the filing of their evidence, which was after the first hearing of this summons, the Defendants indicated that they were disposed to change the packaging for Hong Kong alone and not for China. However, the change in the packaging is merely a change in the background colouring of the packaging and a change in some of the colouring on the rectangular boxes but not a total change and in some respects only a change in the shade of yellow to a darker gold and in another respect a change from a darker shade of silver or grey to a lighter shade of silver or grey.

9. The bone of contention in this case really, however, is what form of wording the injunction or an undertaking should take. I explored that with Mr. Kotewall Q.C. who appears on behalf of the Defendants last week and it emerged that really any undertaking or any injunction would have to be worded in the usual form in a way that would prevent manufacture, distribution and sale, but if the Defendants were to be permitted to continue their old packaging for sale of goods to China, there would have to be a proviso which permitted that.

10. In my view, taking the position in Hong Kong first, it seems to me clear that there must either be an undertaking or an injunction to prevent distribution of the old packaging. There, to my mind, is no doubt about it. There can scarcely be any defence to a case of passing off based on get-up. This is of course not a case of counterfeiting as such because the trade marks are different but it comes as close to an exact reproduction as any case of get-up, in my view, does.

11. Of course, imitation of get-up on its own and copying on its own does not give a cause of action in itself, but it does indicate this that if the Defendant has produced something which is so close to the Plaintiff's product, the Court is usually not inclined to exercise its imagination to believe that the Defendant has failed to produce something which is likely to be passed off. In the absence of a full explanation as to how the Defendant arrived at its packaging which is the subject of complaint, the Court not unnaturally takes an adverse view as to any intentions which the Defendant might have and as to the likely result of any actions.

12. In this case, the 1st Defendant really did not explain how its packaging was arrived at. It said in its evidence that it had instructed an artist by the name of Kam Garden to make its packaging. But I am told that when the only documentary evidence which was produced, is properly understood, all it relates to is the colour separations. That is hardly design work in itself. So I proceed upon the basis that the Defendant has not really explained how it came by this packaging. I draw from that the obvious conclusion that it would be a very difficult thing for it to explain.

13. I then turn to the new packaging, so to speak, which the 1st Defendant has devised, the one with the black and gold colour as opposed to the white and red colour. In my view, Mr. Liao Q.C. is correct when he says that that too should be stopped. As he has correctly pointed out, the situation might be different had the Defendants not put their red and white old packaging on the market, but having done so and the similarities being so close, the effect of this yellow and gold packaging may well be to cause customers to believe that this was some kind of deluxe packaging or otherwise. In effect, what it would be doing would be to permit a possible continuation of hte deception. In view of hte fact that the Defendant is changing its packaging, I consider that that change should be much further apart from the Plaintiff's packaging than this yellow and gold which has been produced. I would mention that it is the Defendants' case that its name "Chai Tin Sow" is crucially important. If that be the case, the get-up of the packaging becomes less important and the consequent damage by causing any change becomes less important.

14. I next come to consider the question of whether there should be a proviso which permits sale in China. I have to say that this has caused me grave anxiety and caused me to consider the matter particularly over the adjournment as to whether an injunction should, in effect, be granted. I hesitate because one comes with, first of all, the notion that interlocutory injunctions are temporary and speedy matters and should not be granted where there has been lengthy periods of delay. I, for one, consider that that is a very important starting point to a consieration of whether there should be an interlocutory injunction.

15. It impinges on a number of matters. It impinges, first of all, because very often what the Court decides is best to do is to preserve the status quo. If there has been a long period of delay, the status quo will clearly be to allow the Defendant to continue to do what it has been doing. It impinges too on the question of the damage. If the Defendant has been doing something for a long period of time, it is unlikely that the damage that will be caused by continuation until trial will be of such an irreparable nature that it should not be permitted to continue. It impinges too on the question of whether the Plaintiff has established the seriousness of the damage that will be caused by what the Defendant is doing. If the Plaintiff has been content to sit by for a substantial period, then it is unlikely that it considered the matter so seriously and was seriously concerned about the damage that was being caused. If the Plaintiff is not seriously concerned about the damage which has been caused should the Court then assume that it is serious damage which is likely to be caused?

16. However, having borne these considerations in mind, one also has to consider what is being allowed. In the first place, one of the problems with a proviso of the nature which I have indicated which would allow the Defendants to manufacture in Hong Kong and sell to China is that of course they have no control over the products once they have been manufactured and sold. Those products could conceivably come back to Hong Kong again. There is no continuing control either by contract or otherwise over those products.

17. I consider that an important consideration in deciding whether to include a proviso to enable manufacture in Hong Kong for sale overseas is whether it has been demonstrated that the Defendant has a legitimate trade to protect. In my view this has not been made out in this case.

18. The Court also has to consider, in my view, what are going to be the issues in the case. I taxed Mr. Kotewall Q.C. on this. At the end, it seemed that at this stage, at any rate, the likely defence in the case was a defence possibly as to the grant of an injunction, it being said that the Defendant having sold its goods in China for the last 3 1/2 years, and one can assume 4 years until trial, it would have built up a significant reputation of its own and therefore should not be enjoined from doing what it is doing.

19. Mr. Liao Q.C., for the Plaintiff, cited to me the Electrolux Limited v. Electrics and Another 71 RPC 23 where the Court of Appeal indicated in a trade mark case that substantial periods of delay on its own are not sufficient to debar a plaintiff from obtaining an injunction. Mr. Kotewall Q.C. rightly pointed out that the case cited in that judgment related to a statutory right. That may be right but I would be more than surprised if a period of 3 1/2 years' delay would be sufficient to debar a plaintiff from obtaining final relief of an injunction at trial particularly in the circumstances of this case.

20. Mr. Liao Q.C. has cited to me the case of Series 5 Software Limited v. Philip Clarke [1996] FSR 273 where Mr. Justice Laddie rehearsed the history of interlocutory injunctions both before and after American Cyanamid and set out what he understood to be the position now in 1996 following the American Cyanamid case and its aftermath bearing in mind, of course, that that decision in itself is now nearly a quarter of a century old. He summarised his conclusions on p.286 in 4 propositions.

21. In my view, the most important of those and I agree with it and indeed it is what was said in the American Cyanamid case by Lord Diplock himself, is that when it comes to interlocutory injunctions, each case has to be decided on its own and the relief must be kept flexible and practical.

22. In my view, I should not, in accepting an undertaking or in granting an injunction, include a proviso which allows for manufacture in Hong Kong for distribution in China. By doing so, I am not of course specifically granting an injunction which affects China.

23. I do draw this to attention that the cause of action which prevents somebody from manufacturing what are called instruments of deception within the jurisdiction for use outside the jurisdiction and the cause of action which allows someone to sue in respect of a tort committed overseas, thus enabling a passing off action to be brought within the jurisdiction for passing off which takes place outside the jurisdiction, are things which experience shows are known by those practitioners within the industrial property field but are not necessarily known outside. I would not necessarily attribute that knowledge say to a trade mark agent. Whether they were consulted in 1994 by the Plaintiff or not, I know not. But even if they were, I would not necessarily expect them to know that it would be possible to bring action in Hong Kong in respect of a passing off which was primarily taking place in the People's Republic.

24. In my view, looking at the case as a whole, however, the following matters appear to me to be important. First of all, this is to my mind, as I have said, a very clear case where the get-up of the Plaintiff's product has been copied and a very strong case of passing off based on get-up. Secondly, although the Defendants have been selling in the People's Republic for the last 3 1/2 years, their sales by comparison with the Plaintiff's have been very small and from what I can see from the evidence have been confined to a small area. There has, however, been with the introduction of the 2nd Defendant, who is also a distributor of other well-known products, perhaps an increased vigour in the 1st Defendant's sales and it cannot be assumed that the Defendant's sales in the People's Republic are going to remain static from now until the trial. Indeed the indications are that they are possibly increasing to a significant amount. Hence, not only will the sales go up but the area of the sales is likely to increase. The Plaintiff has given a list of places where their products are on sale in the People's Republic and they are diverse. It seems to me quite likely that the Defendants' product, if they were permitted to go on selling this particular product, would then impinge into areas where they have not at present been but are likely to go. Having considered carefully, as I say, the important consideration of whether delay should bar relief in this case, I am not convinced that it should.

25. In my view, I should grant the injunction as sought on what was handed up to me as being a draft amended summons although I do not consider it necessary to have the summons amended because I think the relief can be granted on the summons as issued. I will, however, of course grant the Defendants some period of time in which to change their packaging. I will stay the effect of the injunction for a suitable period but I will hear the parties on that.

Representation:

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Mr. Andrew Liao Q.C. and Mr. Felix Pao, instructed by Messrs. Simmons & Simmons, for the Plaintiff.

Mr. Robert Kotewall Q.C. and Mr. John M.Y. Yan, instructed by Messrs. Simon Siu, Wong, Lam and Chan, for the Defendants.

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