Fabrique Ebel Societe Anonyme v. Remex Electronics Ltd

HCA007982/1983

BETWEEN

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Coram: Hon. Clough J.

Date: 21 October 1983

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J U D G M E N T

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1. On the 10th August 1983 I granted the Plaintiff's application in this action for an interlocutory injunction and summons dated the 27th June 1983 except paragraph 4 of the summons and subject to slight modifications to be embodied in minutes of order to be approved by the court and to fortification to the extent of HK$1,500,000 by the Plaintiff of the undertaking as to damages. Pending the approval of the minutes of order I continued in force the ex-parte order which had been made by De Basto J. on the Plaintiff’s application on the 27th June 1983. I now give my reasons for granting the relief sought by the Plaintiff.

2. By its Writ issued on the same date as the inter partes Summons and ex-parte order mentioned above the Plaintiff seeks the usual relief in respect of the alleged passing off by the Defendant of its watches as watches of the Plaintiff's manufacture or merchandise and in respect of the alleged infringement by the Defendant of the Plaintiff's copyright in two original drawings (which are identical save as to size) of watches.

3. In substance the Plaintiff contends that the Defendant has deliberately put on the market cheap imitations of the distinctive watches of the Plaintiff in circumstances amounting to passing off. The Plaintiff also contends that the allegedly offending watches of the Defendant are reproductions, within the meaning of that expression in Section 48(1) as supplemented by Section 49(1) of the Copyright Act 1956, of the Plaintiff's original drawings which are artistic works and that the allegedly offending watches reproduced in three dimensional form the Defendant's drawings in breach of Section 3(5) (a) of the Act. The Plaintiff further contends that, in breach of Section 5(3) of the Act, the Defendant has sold the allegedly infringing watches and offered them for sale with knowledge that they constituted an infringement of the Plaintiff's copyright.

4. By its inter partes Summons now before me the Plaintiff seeks the usual interlocutory injunction and ancillary relief. The injunction sought is to restrain the Defendant until judgment or further order from "........ manufacturing, assembling, importing, exporting, ordering, offering for sale, selling, supplying, disposing or parting with possession of or otherwise howsoever dealing in or with" (1) watches of a specified type seized from a customer, M.B.O. Far East (H.K.) Ltd. ("M.B.O.(H.K.)") or identical or substantially similar in appearance to certain watches of the Plaintiff exhibited in evidence or illustrated in a brochure of the Plaintiff exhibited in evidence, or (2) any other watches which are copies or substantial copies of the original drawings mentioned above, and from "causing, enabling, assisting or procuring any others so to do."

5. Originally the injunction sought also extended to any parts of the allegedly offending watches but by the time of the hearing of the Summons the Plaintiff had, for the purposes of the Summons, restricted its claim to an interlocutory injunction in respect of components other than bracelets of the allegedly offending watches.

6. The application was strongly contested by the Defendant any by the time it was heard no less than 17 affidavits with numerous exhibits were read to the court. Much of the evidence was of a forensic character.

7. The principal evidence relied upon by the Plaintiff was contained in an affidavit sworn on the 20th June 1983 by Mr. Roper, a solicitor for the Plaintiff, to support an ex parte application for an Anton Piller order in similar proceedings brought by the Plaintiff in Hong Kong in High Court Action No. 7163 of 1983 against M.B.O. (H.K.) and in five affidavits sworn by Mr. Steadman, another solicitor for the Plaintiff in this action. Mr. Steadman swore a 6th affidavit on the 10th August 1983 but it was not read to the court.

8. The Defendant relied on the evidence contained in three affidavits of their Managing Director Mr. Brooks, the evidence of Mr. Bland, their Product Manager who swore 2 affidavits, and an affidavit of one of their solicitors Mr. Campbell.

9. The evidence of Mr. Roper relied upon by the Plaintiff in this application related to the background of the Plaintiff and its product and its claim to copyright in the drawings mentioned above.

10. According to Mr. Roper's evidence, the Plaintiff is a Swiss company which has been a manufacturer and distributor of Swiss made watches of high quality since 1911. Its watches are distributed and sold all over the world including Hong Kong. It occupies the more expensive and exclusive end of the market. The least expensive of its watches is sold retail in Hong Kong for about HK$3,500 and the most expensive for about HK$84,000. As evidence of the prestige of the Plaintiff's watches, Mr. Roper exhibited a copy of a feature which appeared in "Harpers and Queen" showing an Ebel watch in the company of watches of leading manufacturers such as Cartier, Rolex, Baume & Mercier and others.

11. Mr. Roper deposed that the Plaintiff's watches were first sold in Hong Kong in April 1981. The action against M.B.O.(H.K.) was, he said, concerned with watches in their range with a "round" case (as in the present action) which accounted for between 75% and 80% of the Plaintiff's total sales in Hong Kong.

12. According to Mr. Roper the design of the Plaintiff's round watch is unique and this is best appreciated by looking at the watch from above. He described the design of the watch in the following words:-

"The outside edge of the case keeps approximately the same distance from the circumference of the watch face except at six points. Four of these points occur below the lugs to which the strap is attached, one occurs adjacent to the winding crown and the sixth point is opposite to the winding crown. At five of those points the Court will see that a screw has been inserted into the case. The sixth such point is partially occupied by a cut-out containing the winding crown. The case is manufactured from a single piece of metal and the screws attach the face to the case as well as being part of the decorative design of the watch."

13. Mr. Roper exhibited copies of the two original drawings of the watch case. The copyright in the drawings was assigned to the Plaintiff on the 4th August 1982 by a Mr. Eddie Schoepfer, a freelance designer who had executed them at the Plaintiff's request. The first sale of a watch made to this design had taken place in Germany in March 1979.

14. Mr. Roper expressed the belief that the Plaintiff had through its sales and promotional activities in Hong Kong built up a substantial reputation in its round watches and in particular in its unique case design. He gave figures of the value of the Plaintiff's wholesale sales in Hong Kong and worldwide respectively for the period from April 1981 to the end of 1981 which he claimed showed that the Hong Kong sales had formed a significant part of the Plaintiff's worldwide market. He gave incomplete figures for 1982 because precise figures were not available and Mr. Steadman gave more up to date figures in subsequent evidence contained in his affidavit sworn on the 1st August 1983 to counter previous evidence of Mr. Bland on behalf of the Defendant alleging that sales of the Plaintiff's watches were insufficient to generate any reputation in the shape of those watches and that the goodwill of the Plaintiff was attached to the Ebel name.

15. Mr. Steadman specified the value of worldwide sales figures of the Plaintiff for 1982 and expressed the belief that sales of the round model accounted for 90% of the total. He also specified the value of worldwide sales of the Plaintiff for the first half of 1983 which he said indicated that the rate of sales had remained constant. He gave an approximate figure for the value of the Plaintiff's monthly wholesale sales in Hong Kong and deposed that some 90% of those sales were taken up by the round models. He deposed that these figures and the Plaintiff's continuing publicity campaign in the press were the basis of his belief that the shape of the Plaintiff's round watch was distinctive and readily associated with the Plaintiff in the eyes of the public.

16. In a subsequent affidavit sworn on the 4th August 1983 Mr. Steadman gave further details of the Plaintiff's sales figures which the Defendant agreed should be treated as confidential to the Defendant's counsel and solicitors. These figures gave the breakdown of the numbers of watches sold worldwide by the Plaintiff and were the basis for his evidence that 57% of the Plaintiff's worldwide sales were "sports" models with round cases. The average price of the most popular round "sports" model was, according to Mr. Steadman, S.Fr.1,433 being then the equivalent of about HK$4,730.

17. As to promotional costs, Mr. Roper deposed that the Plaintiff's worldwide promotional costs had been the equivalent of S.Fr.2,500,000 or roughly HK$8,325,000. The cost of promotion in Hong Kong had been S.Fr.479,000 or about HK$1,595,000 and promotional costs for 1982 were, he said, expected to remain the same. He also exhibited examples of what he described as the extensive publicity material published in Hong Kong on behalf of the Plaintiff.

18. The evidence of Mr. Steadman included evidence in an affidavit sworn on the 27th June 1983 of events leading up to the ex parte application to De Basto J. on the same date for an Anton Piller order against the Defendant.

19. He deposed that 18 actions had been started by the Plaintiff in Hong Kong and that in 17 of them successful applications had been made for ex-parte interlocutory relief. Actions had been started by the Plaintiff in England, Switzerland and New York and the Plaintiff's firm had instructions to take action against every infringement of the Plaintiff's rights where warranted by the scale of the infringement.

20. In the same affidavit Mr. Steadman gave an account of the Plaintiff's sources of evidence against the Defendant. He referred to information given to his firm on the 27th May 1983 implicating the Defendant after proceedings had been taken in New York by the Plaintiff against companies called Eastman and wakmann respectively in respect of imitation Watches. In the case of Eastman the information was that the name "Remex" was stamped on the movement of the offending watch. In the case of Wakmann the information was that Wakmann had been supplied with the offending watches by "Remex".

21. The second source of evidence was the sequel to a trade exhibition in Basle in April 1983 at which the Defendant exhibited watches. In multi-partite proceedings in Switzerland in which the Plaintiff and Defendant participated on opposite sides the Plaintiff alleged that the Defendant infringed its designs and obtained a restraining order against it. Attempts to negotiate a settlement failed.

22. The third source of evidence was the sequel to the Basle Trade Fair this year at which MBO Schmidt and Niederleitner GmbH & Co. K.G. ("MBO Germany") an associated company of MBO (H.K.) had exhibited watches. Both the Plaintiff and Piaget S.A. obtained restraining orders against MBO Germany in respect of alleged imitations. The transcripts of the proceedings exhibited to Mr. Steadman's affidavit indicates that "Remex" were referred to by MBO Germany's lawyer as suppliers of offending watches but, as Mr. Steadman pointed out in his affidavit, Remex was not specifically identified as the suppliers of the alleged Ebel imitations.

23. The fourth source of evidence was evidence obtained by the Plaintiff from MBO(H.K.) when it executed the Anton Piller order which it obtained against MBO(H.K.) on the 20th June 1983. This evidence included invoices and orders relating to watches, allegedly corresponding very closely to the Plaintiff's round sports models for men and women, which had been shipped to MBO(Germany) f.o.b. Hong Kong on the order of MBO(H.K.) which earned commission on the transaction.

24. MBO(H.K.) had also produced, in compliance with the Anton Piller order made against it, four sample watches alleged by the Plaintiff to be imitations of its watches. Mr. Steadman deposed that one of the samples appeared to be Model 3742 of both MBO Companies (which had a common brochure) and that model appeared from one of the exhibited MBO(H.K.) orders dated 15th December 1982 to be referred to by the Defendant as model 262081.

25. On the 27th June 1993 Mr. Steadman and a partner in his firm, Mr. Black, and six clerks went to the Remex Centre, a 22 storey building in Aberdeen, to execute the Anton Piller order obtained by the Plaintiff from De Basto J. on the same day. Mr. Steadman and Mr. Black and two of their clerks Messrs. Pan and Cheung Yuk Tong have deposed to the circumstances under which the Anton Piller order was executed and a substantial quantity of evidence in the form of watches, components and documents was found, together with one of the Plaintiff's current catalogues.

26. For the purposes of the present application it suffices to mention that the uncontradicted evidence of the Plaintiff's witnesses was to the effect that the receptionist on the 4th floor warned the staff in the building of the arrival of the search party when it arrived at about 2.20 p.m. The party did not leave the building until about 8.45 p.m. and the reason for the delay was that members of the staff of the Defendant were initially thoroughly devious and evasive until told to comply with the order by their superiors Mr. Bryant, the Defendant's Financial Controller and Mr. Bland, the Defendant's Product Manager.

27. Employees were intercepted by Mr. Pan when attempting to remove watch cases of the Ebel type and watch dials of the Piaget type. Other employees hid stocks of the allegedly offending watches on the roof of the Defendant's premises and in the nearby building where they also hid watches very similar to the Rolex design and components similar to those of Piaget watches. Stock records relating to allegedly offending watches were also removed from their file and hidden.

28. The evidence of Mr. Steadman was that Mr. Bryant told Mr. Steadman when he initially failed to find any of the watches, apart from those intercepted by Mr. Pan, that the models in which the search party was interested were being phased out and that it might be that the ones the party had by then found represented all that remained. Mr. Steadman also deposed that a Mr. Chan, one of the Defendant's staff, eventually admitted to him that he had given instructions for the watches to be hidden on the roof of the Defendant's premises and in the other nearby building because he had been told to do so by "the Directors."

29. Further evidence contained in affidavits of Mr. Steadman was relied upon by the Plaintiff, but I will defer reference to his subsequent evidence because it was given by way of reply to evidence adduced on behalf of the Defendant.

30. For the Defendant the evidence of Mr. Brooks, its Managing Director, contained in his affidavits sworn on the 6th, 7th and 15th July 1983 was primarily concerned with emphasising the substantial character of the Defendant, the substantial damage that would be caused to it by the ex-parte order and any interlocutory injunction and the desirability of fortification of the Plaintiff's undertaking as to damages if any injunction were to be granted.

31. In his first affidavit Mr. Brooks described the Defendant as part of a very big group. Its parent company Remex Holdings Ltd. is an ultimate subsidiary of Time Products P.L.C. of the United Kingdom which has an annual turnover of about £62.4 million. Another subsidiary of Time Products P.L.C., namely Global Watches Ltd. has the first or second largest selling watch brand in the United Kingdom. He deposed that the Remex Group of companies was reputed to comprise the largest watch assembling concern in Hong Kong and it has a present turnover of approximately ￡33.8 million.

32. Much of his evidence in his first affidavit related to the damaging consequences of the Defendant being injuncted from selling bracelets of similar appearance to those of the Plaintiff with non-offending watches. That problem had been resolved by the time of the hearing. However he stressed that the Plaintiff and the Defendant operated in entirely different spheres and that the trade marks used on the Defendant's watches were entirely different from the Plaintiff's trade mark. He also stressed that, apart from immediate loss to the Defendant of over HK$1,000,000 of which about $900,000 would be due to the loss of orders of allegedly offending watches that would be caused by the injunction sought by the Plaintiff, the most important damage to the Defendant extended to damage to credibility and reputation and such damage could not be quantified.

33. The second affidavit of Mr. Brooks sought to amplify his earlier evidence and stressed again the wider effect of any injunction on the general business and reputation of the Defendant and its associated companies which he claimed was beyond measure.

34. In his third affidavit Mr. Brooks exhibited documentary evidence to support his earlier estimate of the likely losses to the Defendant resulting from orders that would be lost by reason of the ex-parte injunction running from the making of the order by De Basto J. on the 27th June 1983 to the hearing of the inter-parte Summons on or soon after the 5th August 1983. He exhibited a schedule setting out in detail the number of allegedly offending watches ordered, shipped and remaining to be shipped by the Defendant.

35. He also exhibited a bundle of copy orders and invoices to which the schedule related. These exhibits showed that the Defendant had received orders for $47,825 pieces of the allegedly infringing watches and that since the end of November 1982, when the Defendant began shipping the watches, they had delivered 16,659 pieces leaving 31,166 outstanding. He contended that the loss of profit on each watch would be $29.00 and that accordingly the calculable loss confined to the period between the making of the ex-parte order on the 27th June 1983 and the prospective hearing of the inter parte Summons on the 5th August 1983 would be about HK$900,000.

36. The evidence in the affidavit of Mr. Bland sworn on the 20th July 1983 indicated the defence of the Defendant to the Plaintiff's claim. He described the Remex group of companies as the largest watch manufacturing and assembling concern in Hong Kong and as one of the ten largest in the world. Mr. Bland referred to the 1982 Annual Report and Accounts of Time Products P.L.C. as containing an insight into the business of the Defendant and its associated companies and pointed out that Time Products P.L.C.'s goodwill and reputation was such that it was the sole agent in the United Kingdom for the Swiss manufacturers of "VACHERON CONSTANTIN" who make the most expensive watches in the world and for "LONGINES" Swiss watches.

37. By reference to the same illustrative leaflets of the Defendant's watches as had been exhibited by Mr. Steadman and to copies of the Defendant's typical advertisements Mr. Bland drew attention to what he described as the invariable prominence in clear and distinct lettering to the Defendant's trade mark "REMEX".

38. After criticizing the inadequacy of the sales figures provided by Mr. Roper (which had not yet at that time be supplemented by Mr. Steadman) Mr. Bland contended that it was unlikely that the Plaintiff's sales in Hong Kong could have been affected by the Defendant's sales in Hong Kong since, to the best of his knowledge, the alleged infringing watches had never been sold by the Defendant in Hong Kong. He did his own calculations, again based on the sales figures of Mr. Roper before they had been supplemented by Mr. Steadman, which he said showed that the number of round sports watches sold in Hong Kong and worldwide could not be very significant and that the present annual turnover in Hong Kong for all the Plaintiff's models appeared to be hundreds rather than thousands, whereas worldwide this figure appeared to be less than 10,000 sales per year.

39. Mr. Bland contended, on the basis of these calculations, that any reputation of the Plaintiff must lie in the very high price of the Plaintiff's watches and in the name "EBEL" and he pointed out that the advertisements of the Plaintiff exhibited by Mr. Roper emphasised the name "EBEL" and carried the slogan "A FAMOUS NAME IN WATCH MAKING". He submitted that the repeated use of the slogan confirmed that it is not the design on which the public recognition is based.

40. He continued to make a number of assertions which I endeavour to summarise as follows:

(1) There are an "amazing number" of styles of watch and bracelet in the market. Functional and practical aspects largely dictate size and general shape of a watch within which boundaries all watch designers and manufacturers must work. There are, he claimed, a multitude of design variations and therefore of necessity designs are often such that two or more can appear to be very similar.

(2) The round case in which the Plaintiff claims copyright is not of great distinction and any special subtlety in its undulating curves that might be recognized to distinguish it from other cases has not been reproduced in the case the Plaintiff objects to.

(3) A substantial part of the labour and skill invested in the design of the Plaintiff's watch in respect of which copyright is claimed relates to the subtlety of its design and that has not been appropriated by the Defendant.

(4) Mr. Roper himself had identified the differences appearing in the Defendant's alleged offending watch case. The appearance of that case was much more basic than that of the Plaintiff. Mr. Roper had already referred to the "cleaner lines" of the Defendant's case, and to the absence of the screw opposite the winding crown on the case of the Defendant. Moreover the Defendant's case had no recess for the winder.

(5) The Plaintiff could establish no exclusive reputation for a round case incorporating screws or screw like protuberances around the front of the case.

41. In support of the last assertion Mr. Bland exhibited a bundle of advertisements of six different watch manufacturers which he contended showed watches of generally similar design to the Plaintiff's round case. He also exhibited a Cupillard Rieme watch similar in appearance to the Plaintiff's round sports model. Mr. Bland deposed to having bought the watch on the 16th July 1983 from the Artland Watch Co. Ltd. in Kowloon for $680.00 and to have been informed when he bought it by a representative of the vendor company that the model had been sold openly in Hong Kong for several months.

42. Mr. Bland denied the allegation of Mr. Steadman that the allegedly offending watches were deliberately omitted from the Defendant's brochure. The brochure was, he said, originally printed for the 1982 Basle Fair and that was prior to the time when the Defendant commenced dealing with the allegedly offending watches. He also deposed that the Directors of the Defendant were not at the Defendant's premises when the Plaintiff's representatives went to execute the Anton Piller order on the 27th June 1983 and that as soon as they became aware of the situation they instructed all concerned to afford full co-operation and assistance to the Plaintiff's solicitors.

43. Mr. Bland deposed that the Defendant's watches of the type alleged to infringe the Plaintiff's rights were sold retail for the equivalent of HK$300 per piece and this was to be compared with the prices of the Plaintiff's watches varying between several thousand dollars to tens of thousands of dollars each. The respective markets were, he said, quite different and there could be no confusion by purchasers. He knew of no instance where one retailer had offered for sale within the same premises watches manufacturered by both parties. There was, he said, little likelihood of persons wearing the Plaintiff's watches moving in the same professional or social circles as those wearing the Defendant's watches.

44. He deposed that he could not foresee any effect by the Defendant's sales upon sales of the Plaintiff's allegedly affected watches.

45. He added that the Defendant had never used any trade mark similar to that of the Plaintiff in relation to its watches and that trade marks had always appeared quite distinctly and legibly on the relevant watches to indicate derivation from the Defendant and/or from those of the Defendant's customers who request that their trade marks be applied. He also pointed out that no instances of confusion had resulted from the sale of the Defendant's watches.

46. Mr. Bland concluded his second affidavit by amplifying Mr. Brooks' earlier evidence regarding the substantial damage that they both alleged would be caused to the Defendant by the ex-parte injunction and by the injunction now sought by the Plaintiff. He referred to the inestimable damage that would result to the relationships which the Defendant enjoyed with its customers who were exporters and overseas distributors who had their own commitments to their customers.

47. According to Mr. Bland the effect of the injunction against the Defendant would be to sour the Defendant's business relationships and make its customers reluctant to purchase other watches of the Defendant's manufacture. He contended that the resultant loss of confidence was bound to have very damaging and irreparable repercussions on the Defendant's future business in general and that such damage to the Defendant's credibility and reputation far outweighed any losses attributable to lost sales of the alleged infringing watches alone.

48. To support these contentions he exhibited two complaints sent to the Defendant in July 1983 regarding the supply of allegedly offending watches by the Defendant. One complaint was from MBO(H.K.) referring to watches "of Ebel type" and invoking the Defendant's guarantee to indemnify them from claims for infringement. The other was from an Italian customer who had read in the newspaper of serious problems in Hong Kong in selling "watches similar to Ebel" and enquirying urgently if the Defendant was able to continue the supply of such watches.

49. As regards the likelihood of the Defendant losing orders as a result of being injuncted, Mr. Bland deposed that of the 31,166 relevant outstanding orders 8,400 had already been cancelled.

50. The second affidavit of Mr. Bland prompted a lengthy riposte from Mr. Steadman in his affidavit sworn on the 1st August 1983, in which he first gave further evidence regarding the Plaintiff's sales referred to earlier in this judgment and then deposed to the following matters:-

(1) As to Mr. Bland's evidence that all the Defendant's watches were marked with either the Defendant's trade mark or that of their customers, Mr. Steadman referred to one of the watches seized from MBO(H.K.) which he inferred, from its similarity to a watch seized from the Defendant, to have been supplied by the Defendant. He pointed out that there was no name on the face of the watch seized from MBO(H.K.) and that such a situation lent itself to the application of names confusingly similar to that of the Plaintiff. He also pointed out that even names applied to watches can easily be altered by repainting or replacing the dial.

To this Mr. Bland replied in his second affirmation sworn on the 5th August 1983 that the Defendant had sold watches with blank dials to Wakmann but the Defendant had no reason to think that Wakmann would be a party to any infringement or passing off of the Plaintiff's trade mark. Wakmann had its own well known brand "WAKMANN" and Mr. Bland was confident that Wakmann would vet properly any trade marks it applied to watches prior to onward sale.

Mr. Bland admitted that the Defendant normally supplied unmarked samples and that the watch obtained from MBO might have been such a sample.

(2) Mr. Steadman submitted that the Plaintiff owned a reputation both in its name and in its watch shape and that the sale of unmarked or easily re-named watches of identical design may enable others to seek to pass off watches as and for the watches of the Plaintiff. He added that damage caused by sales lost through actual confusion were recognised by the Plaintiff to be only a part of the overall damage suffered. Of far greater concern to the Plaintiff, he deposed, was the debasement of their exclusive design and name by the profusion of cheap imitations.

He stressed the number of orders (47,825 watches) already given to the Defendant of which the bulk (31,666) remained to be shipped.He also stressed that most of the Defendant's customers seemed to be in the U.S.A. and Europe which were important markets to the Plaintiff and its "up-market" competitors. He further contended that the flooding of such markets with cheap copies would do great damage to the Plaintiff, and in particular, it would do damage by persuading potential customers of the Plaintiff to choose other brands whose reputations had not been tarnished by cheap imitations. Remex represented by far the largest single supplier of such imitations which the Plaintiff had so far identified and the release of over 30,000 imitations on to the market would be very damaging to the Plaintiff.

(3) As to Mr. Bland's points on copyright Mr. Steadman contended inter alia that none of the watches shown in the advertisements of allegedly common designs exhibited to Mr. Bland's affidavit was remotely as similar to the Plaintiff's design as was the Defendant's allegedly offending watch. He stressed that if the Defendant had simply chosen the general "look" of a round watch case with screws, the Plaintiff would not have objected. But Mr. Steadman's belief was, he deposed, that the Defendant had appropriated the exact design of the Plaintiff's watch. He invited the court to superimpose the Defendant's watch on Mr. Schopfer's drawing.

(4) Mr. Steadman asserted his belief that the Defendant had set out deliberately to copy the Plaintiff's design and that the similarity between the watches of the two parties was no coincidence. He gave the following reasons for his belief:-

(a) The conduct of the employees of the Defendant at the time the Anton Piller order was executed in concealing all watches, namely watches of the design of Piaget and Rolex as well as those of the Defendant. This was done when they did not know which manufacturer was suing the Defendant.

(b) His discovery at the Defendant's premises of a complete up-to-date catalogue of the Plaintiff.

(c) The reference to the Defendant's Italian customer's complaint to "watches similar to Ebel".

(d) The omission, which Mr. Steadman contended is deliberate, of the allegedly offending watches from the Defendant's loose leaf catalogue despite the fact that the relevant model has enjoyed substantial sales since its introduction.

(e) The admission as "basically true" by Mr. Bland on the day of the execution of the Anton Piller order of Mr. Black's allegation that the Defendant had dealt in watches "very similar" to the Plaintiff's design.

Mr. Bland in his affidavit sworn on the 5th August 1983 contested Mr. Steadman's allegations under this head by pointing out that the Defendant's promotional leaflets include illustrations of watch designs similar to those of "ROLEX" and "PIAGET" and that the Defendant plans to add a leaflet relating to the allegedly offending watches, but there is no pressing need for this in view of the existing orders.

As to the Plaintiff's catalogue being found on the Defendant's premises Mr. Bland deposed that it is common practice in the watch industry to maintain a comprenensive and up-to-date surveillance of the latest fashion trends in the industry. He accepted that the Defendant's watches in question in these proceedings were "similar" to the Plaintiff's watches but that did not mean "copy" or "imitation". As regards the admission made to Mr. Black by Mr. Bland when the Anton Piller order was executed, Mr. Bland asserted that Mr. Black was questioning him about continuing shipments of the allegedly offending watches by the Defendant and not as to whether Mr. Bland agreed that the Defendant's watches were "very similar" to the Plaintiff's watch.

(5) As to the damage the Defendant claimed it would suffer if injuncted, Mr. Steadman challeged the Defendant's figures but pointed out that if the damage were treated as HK$1.3 million over a 6 month period this would be insignificant in relation to the disclosure in the Annual Report of Time Products P.L.C. that the Remex group is expected to lose HK$45 million on a turnover of HK$686 million for the financial year 1982/83.

He pointed out that the Defendant's catalogue exhibited by Mr. Bland showed that the Defendant sold 370 different models which he contrasted with the Plaintiff's one basic design with 4 variants. He also mentioned that Belfont and other customers of the Defendant were associated companies and that customers such as MBO, Eastman and Wakmann were already the subject of independent claims and that companies which dealt in watches resembling famous designs did so with full knowledge of the risk they were running. They accepted such risks and would, he claimed, think none the worse of the Defendant.

Furthermore he contended in effect that the Defendant had only itself to blame for the consequences of its having first embarked on a deliberate campaign to capitalize on the popularity of various exclusive Swiss designs such as Ebel and Piaget and then continued the campaign after the Defendant's reaction became widely known in April 1983 in the aftermath of the Basle exhibition.

51. In his second affidavit Mr. Bland disputed Mr. Steadman's contention concerning the likely damage to the Defendant resulting from the injunction. The effects of the potential damage could not, he said, be guaged by picking out a figure and deducting it from the Defendant's future business accounts. The real loss, he said, related to the disruption in the Defendant's business commitments with its customers who would view its designs with suspicion in future and tend to adopt a "once bitten twice shy" attitude. He exhibited a telex from an Italian customer cancelling an order for 4,030 watches included in the Defendant's pending orders.

52. The Defendant's evidence concluded with an affidavit of Mr. Campbell, a partner in the firm of solicitors representing the Defendant who exhibited a bundle of photocopies of extracts from the editions of June to July 1980 and December 1981 to January 1982 of the Far East editions of the Europa Star magazine advertising "MICROMA" and "OGIVAL" watches which Mr. Campbell said were similar in design to the Plaintiff's watches and had also been advertised in recent times but without any legal action by the Plaintiff.

53. As Lord Diplock pointed out in American Cyanamid Co. v Ethicon Ltd. (1975) A.C. 396 at p.407 it is no part of the court's function in an interlocutory application at this stage of an action:-

"....... to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial."

Any views on issues of fact and law formed by the court for the purposes of this application are necessarily tentative.

54. The first question to be decided in an application of this nature is whether the Plaintiff has established that there is a serious question to be tried in relation to one or other or both of the Plaintiff's claims in respect of passing off and infrincement of copyright against the Defendant.

Passing Off

55. The Plaintiff claimed, on the basis of the evidence of Mr. Roper regarding sales and promotion, to have established a reputation in Hong Kong in the design of the "round" sports model which it claimed was instantly recognisable, from its appearance, as the Plaintiff's merchandise. As foreshowed in the evidence of Mr. Bland counsel for the Defendant disputed this claim and emphasised that none of the Plaintiff's advertisements exhibited by Mr. Roper advertised the design of the Plaintiff's watch as such but gave prominence to the Plaintiff's name and logotype.

56. Reliance was also heavily placed by the Defendant on the advertisements of watches of six different watch manufacturers which had been exhibited to one of Mr. Bland's affidavits, and it was contended on behalf of the Defendant that these were examples of numerous watches on the market which were generally similar in design to the Plaintiff's round case. Further evidence relied on by the Defence was the Cupillard Rieme watch recently sold in Hong Kong to Mr. Bland for $680 and the advertisements exhibited to the affidavit of Mr. Campbell indicating that watches allegedly of a similar design to that of the Plaintiff had been advertised in Hong Kong since June 1980, the latter date being prior to the introduction of the Plaintiff's round model in Hong Kong.

57. If this action is fought on the passing off issue one of the first and important questions of fact to be decided by the court will be whether the design of the Plaintiff's round watch is sufficiently unique and distinctive as to make it instantly recognised in the eyes of the public and the watch trade as the merchandise of the Plaintiff or whether it is simply one of many examples of a round watch with screws on its case so that any reputation it has earned in the eyes of the public and the watch trade is to be attributable to the name of the Plaintiff rather than the design of the watch. As indicated above there is a clear conflict of evidence on this point which cannot properly, in my judgment, be resolved in these interlocutory proceedings.

58. Relying on the definition of the essentials of a passing off cause of action contained in the speech of Lord Fraser in Warnink v Townend & Sons (Hull) (1979) A.C. 731 at pp.755/6 counsel for the Defendant contended that the Plaintiff's passing off claim must fail in limine because it was only entitled in these proceedings to protect its goodwill in Hong Kong and Mr. Bland had given unchallenged evidence to the effect that, to the best of his knowledge information and belief, the allegedly offending watches of the Defendant had never been sold retail in Hong Kong.

59. To this counsel for the Plaintiff retorted that there was evidence of sales to MBO(H.K.) which had led to these proceedings. Furthermore I saw that, included in the sales documents exhibited by Mr. Brooks on behalf of the Defendant, were two contracts and confirmation of orders relating to dealings between the Defendant and MBO(H.K.) dated respectively the 8th December 1982 and the 11th December 1982 providing for local delivery of items Including allegedly offending watches. Accordingly, I am unable to accept, at this stage of the proceedings that the Plaintiff's claim fails in limine since, at the very least, the evidence on both sides seems to indicate that there have been sales to a local "middleman" namely MBO(H.K.): c.f. Draper v Frist (1939) 3 ALL E.R. 513 (C.A.).

60. On the question of the likelihood of confusion counsel for the Plaintiff accepted that where watches are sold with different marks from that of the Plaintiff the burden on the Plaintiff in establishing confusion is heavy but celied nevertheless on the proposition that the fact that goods are sold with a different trade mark from that of plaintiff was not an absolute defence in a passing off action. For this proposition he cited Tavener Rutledge Ltd. v Specters Ltd. (1959) R.P.C. 35 and Kemtron Properties v Jimmy's Co. Ltd. (1979) F.S.R. 86. He was clearly on weak ground here since it must be very unlikely that any purchaser of normal mental capacity knowing the nature of his intended purchase would purchase a small watch with the name "Barclay" on its face for HK$200 and believe that he was in fact purchasing an "Ebel" watch which normally sells retail for an average price of $4,750, whatever the similarities. Counsel for the defence lost no time in stressing this point and citing Fisons Ltd. v E.J. Godwin (Peat Industries) Ltd. (1976) R.P.C. 653 and Addidas K.G. v C'Neill & Co. Ltd. (1983) F.S.R.76.

61. However counsel for the Plaintiff stressed, and the point had already been clearly made by Mr. Steadman in one of his affidavits, that his strongest point on the question of confusion was that there was clear evidence of the sale of unmarked watches by the Defendant. There had been sales by the Defendant to Wakmann in the United States which Mr. Bland had attempted to explain on the basis that the Defendant trusted Wakmann not to sell watches on without a brand name. However the Plaintiff did not know what mark had in fact been applied by Wakmann and an unmarked watch can be an instrument of deception and confusion.

62. Apart from the watches recovered from MBO(H.K.), which Mr. Bland said must have been samples if they were obtained from the Defendant, counsel for the Plaintiff contended that the evidence showed that watches had been supplied unmarked by the Defendant to Europe. He did not identify to the court the particular evidence which he had in mind, but perusal of the documents exhibited by Mr. Brooks indicates a contract and confirmation of order dated the 27th January 1983 relating to a purchase by Charles Spring (Pty) Ltd. of Sydney, Australia of a quantity of watches with "No Brand", including 200 allegedly offending watches.

63. There was a real danger, counsel for the Plaintiff contended, that if unmarked watches were put onto the market, they could not only be used as instruments of deception but also the public would be confused into thinking that the Plaintiff had licensed the production and sale of cheap imitations. This it was contended would debase the exclusive design and name of the Plaintiff. In my judgment, on the evidence at present before the court, this is a highly arguable point and I am not able to conclude that the Plaintiff has no real prospect of succeeding in establishing a claim for passing off at the trial of this action in reliance on these arguments in relation to the unmarked watches.

64. Counsel for the Defendant sought to eliminate this point by offering an undertaking on the part of the Defendant not to sell any watches which were unmarked or bore a name which might be confused with the name of the Plaintiff. Counsel for the Plaintiff was unwilling to accept any such undertaking in the absence of any clear indication of what name or names the Defendant proposed should be put on the faces of the relevant watches.

65. Having concluded, for the reasons given above, that there is a serious question to be decided under the passing off claim in respect of the watches sold by the Defendant without any mark I did not see any point in pursuing the possibility of a viable undertaking acceptable to the Plaintiff being worked out because, in any event, I concluded that there was also a serious question for decision under the copyright claim.

Copyright

66. Counsel for the Plaintiff contended that the Plaintiff's claim for infringement of its copyright was not only a serious one but a strong one. The claim of the Plaintiff to copyright in Mr. Schoepfer's two drawings was not challenged by the Defendant and accordingly it was for the Plaintiff, its counsel contended, to establish in the action that -

(1) The Defendant's watch case was derived directly or indirectly from the Plaintiff's skill and labour; and

(2) The Defendant's allegedly offending watch had taken a substantial part of the Plaintiff's skill and labour.

67. As to (1), counsel for the Plaintiff pointed out that there was no denial of copying or allegation of independent design behalf of the Defendant and there was clear evidence or the Defendant's access to the Plaintiff's round design. Accordingly, in the absence of any denial of copying the only question to be decided, on the evidence, on the issue of reproduction is whether the Defendant's watch is a reproduction of a substantial part of the Plaintiff's drawings.

68. He invited the court to consider this question in the light of the principles applied by Graham J. in Merchant Adverturers Ltd. v M. Grew & Co. Ltd. (1973) R.P.C. 1 at p.9. In the relevant passage of his judgment, Graham J. emphasised that quelity rather than quantity of material taken is important in this connection and he observed:-

"What is a copy ..... is a question of fact and when the copy is not exact the court must examine the degree of resemblance in accordance with the principles of the cases Hantstaengl v Raines & Co. (1895) A.C. 20 and West v Francis (1322) 5 B. & Ald. 737. .........

There must be such a degree of similarity as would lead one to say that the alleged infringement is a copy of reproduction of the original of the design - having adopted its essential features and substance."

69. As to the requirement of proof of knowledge for the purposes of Section 5(3) of the Copyright Act counsel for the Plaintiff submitted that this was a matter of reasonable inference which the Plaintiff contended could be drawn from the extensive reputation of the Plaintiff not only in Hong Kong but worldwide in conjunction with the action taken against the Defendant and its customer MBO(Germany) in Switzerland, followed by the conduct of the Defendant's employees at the time when the Anton Piller order was executed.

70. Counsel for the Defendant contended that the Plaintiff had not made out a serious question to be tried in the action and in a carefully assembled argument he made a number of forceful points. I will deal with them below but before doing that I emphasise that in my judgment he was seeking to persuade me to draw inferences from the existing evidence and to decide esoteric questions of law which should be more prudently left for docision at the trial after further evidence has been adduced and the court has had the benefit of fuller argument. The more counsel for the Defendant addressed me the more conviced I became that counsel for the Plaintiff was right when he submitted that there was a serious question to be tried on the copyright issue.

71. Counsel for the Defendant began by citing Copinger at p.72, para. 179 for the distinction between derivation and identity and the principle that copyright protects the Plaintiff's drawings and not the concept or idea conveyed by them. He went on to submit that the labour and skill in the drawings relate only to the design of the outer casing. Everything else, he contended, is a drawing of a watch and strap and copyright related to none of those matters. The Defendant had only screwed in the screws on the case and assembled its watch. It had not reproduced any substantial part of that to which the copyright related.

72. If and so far as counsel for the Defendant was seeking to persuade me that the copyright in this case could only relate to the casing of the watch shown on the drawings, I accept the submission of counsel for the Plaintiff, citing Copinger at p.56 para.140, that the drawings must be treated as a whole to determine if copyright exists and only when it is decided that the drawings as a whole are original and entitled to copyright is it correct to inquiry whether the part taken by the Defendant was a substantial part.

73. The next point taken by counsel for the Defendant was that the copyright in the drawings related to a small simple outside configuration of a watch. The drawings were, he contended, so simple that, in accordance with the principles applied by Wills J. in Kenrick & Co. v Lawrence & Co. (1890) 25 Q.B. 99 and by Dillon J. (following Whitford T.) in Politechrika v Dallas Print Transfers Ltd. (1982) F.S.R. 529 at p.541 to 542 in relation to the rudimentary drawings before them, there could only be infringement of a copyright by reproduction if there was an exact or almost exact reproduction of what was special to the drawing over and above the idea behind it.

74. I found it difficult, indeed impossible, to accept in interlocutory proceedings, the proposition that drawings of a watch made for an industry which Mr. Bland, one of the Defendant's witnesses, described as a "fashion-orientated industry" were to be treated as rudimentary and in the same category as the manifestly rudi-entary drawings which were before the courts in the cases cited above. I accepted the contention of counsel for the Plaintiff that there would have to be a considerable additional evidence at the trial recarding the character of the drawing which the Plaintiff contended represented a subtle design with aesthetic appeal.

75. Counsel for the Defendant next took the point that the Defendant's allegedly offending watch is much thicker than that of the Plaintiff whereas the Plaintiff's drawings are so rudimentary that it is not possible to tell what thickness or curvature is intended. Relying on the indecisive but pertinent obiter dictum of Walton J. in E. Gomme Ltd. v Relaxateze (1976) R.P.C. 377 at p.391, he questioned whether, where such a vital aspect is omitted, there could be an infringement of copyright in the drawings of the Plaintiff's watch if the Defendant's watch appears to be the same from only the one-dimensional aspect selected by the maker of the Plaintiff's drawing, even if the two watches themselves viewed completely in the round are different.

76. However counsel for the Plaintiff pointed out that in Merchant Adverturers Ltd. v M. Grew & Co. Ltd. (Supra) Graham J. rejected the argument that no sectional drawing could ever be infringed by a complete three-dimentional object constructed therefrom. Furthermore I accept the submission of counsel for the Plaintiff that the real test is whether or not the Defendant's watch is a reproduction of a substantial part of the Plaintiff's drawings and the point made by the Defence in relation to the side of the watch is merely one of the matters to be considered when applying this test.

77. In applying that test counsel for the Defendant submitted that all the essential features of the Plaintiff's drawing had to be present in the Defendant's watch to establish infringement of the Plaintiff's copyright. A watch was, be contended, a common article of trade and he relied on Nicol v Barranger (1921) McCillivray's Sepyright Cases 219 (C.A.) (a case concerning fashion plates) for the proposition that in the case of common articles of trade a strict standard had to be applied and importance was to be attached to differences in detail.

78. We also cited the decision of Fox J. in J. Bernstein Ltd. v Sydney Murray Ltd. (1981) R.P.C. 303 (which was concerned with dress designs) for the proposition that if one of the essential features of a design protected by copyright is absent from another design, there is no reproduction for the purpose of copyright infringement.

79. It followed, counsel for the Defendant contended, that if on the evidence the Defendant would show that the Defendant's watch did not have the alleged unique features of the Plaintiff's drawing there could be no infringement and no serious question to be tried.

80. We referred to the passage in Mr. Roper's affidavit filed on the 21st June 1983 in the action against MBO (H.K.) where Mr. Roper mentioned the "unique features" of the Plaintiff's design and described the features of the Plaintiff's round watch. Counsel for the Defendant contended that three out of the four essential features of the Plaintiff's design described by Mr. Roper were different in the case of the Defendant's watch. These were: (1) The outer configuration of the Defendant's watch which curved inwards at points whereas the Plaintiff's drawings showed the outer configuration of the Plaintiff's watch keeping equidistant from the circumference of the watch face. (2) The Defendant's watch case had only four screws whereas the Plaintiff's drawings showed an outer case with five screws and (3) The Defendant's winder was different because it did not have the refinement of the "cut-out" shown on the Plaintiff's drawings.

81. Counsel for the Defendant further contended that the Plaintiff's drawings did not indicate any shape for the side of the watch whereas the side of the Defendant's watch was curved. Also the lugs of the Defendant's watch were different, he said, from the Plaintiff's drawings.

82. He submitted that on the evidence before the court in which the Plaintiff had specified what were the unique features of its drawings virtually all the essential features of the Defendant's watch were different, so it was clear there could be no infringement and no serious question to be tried. In my judgment, it would be wrong to treat the evidence of Mr. Roper regarding the allegedly unique and distinctive features of the Plaintiff's drawings as exhaustive for the purposes of this action. I would envisage that if this action goes to trial there would probably be evidence from witnesses engaged in the watch industry and trade regarding the distinctiveness or otherwise of one or other of the features shown in the drawing or regarding the distinctiveness of any combination of those features. I am certainly not disposed to decide this difficult question on the evidence before me nor am I disposed, on the arguments so far put to me, to conclude that a watch intended for the upper end of the watch market is necessarily a common article of trade.

83. Furthermore, after comparing the larger drawing of the Plaintiff with one of the Defendant's watches and noting that their dimensions almost correspond, I am left with at least the initial impression that there is a remarkable likeness between the two and that it is strongly arguable on behalf of the Plaintiff that the Defendant has reproduced a substantial part of the Plaintiff's drawings and that such differences as can be detected on close examination can fairly be described as colourable differences. I was satisfied for the above reasons that there is a serious question to be tried between the parties on the issue of copyright in this case.

Balance of Convenience

84. If the Plaintiff were to succeed in this action under either the passing off or the copyright claim or under both claims it is, in my view, highly unlikely that the court would permit the Defendant to continue what would on that hypothesis be its wrongful act and thereby injure the value of the Plaintiff's goodwill or alternatively destroy the value of the Plaintiff's copyright. It is the Plaintiff's principal model which is at stake here both as regards numbers and value of output and sales. On the evidence before me, the effect of continuing sales of the Defendant's watch, particularly in Europe and the U.S.A., is likely to be disastrous, bearing in mind the substantial output of the Defendant, on the Plaintiff's sales.

85. The effect of those sales is admittedly unlikely to be to draw customers from the Plaintiff to the Defendant. However I accept, for these purposes, the evidence of Mr. Steadman and the submission of counsel for the Plaintiff to the effect that if the Plaintiff's principal markets are allowed to be flooded with cheap imitations the exclusive reputation of the Plaintiff will be eroded and, furthermore, there is a great risk that the Plaintiff's customers or would-be-customers would be inclined to purchase expensive watches at the top end of the market from the competitors of the Plaintiff who are still able to preserve the distinctive exclusivity of their merchandise.

86. I have borne in mind the strenuous argument on behalf of the Defendant that there can be no question of closing the net in this case because there are numerous other watches made all over the world by other manufacturers which are similar in appearance to the Plaintiff's watch and some of these watches have been shown by the Defendant's evidence to have been advertised in Hong Kong as long ago as June 1980, before the Plaintiff put their round sports model on the market in Hong Kong. I am unable to accept this argument because, having scrutinized all the advertisements and the relevant watches which were exhibited at the hearing before me, I am left with the clear impression from my own eyes that the only design which has any close apparent affinity with the Plaintiff's drawings and round watch are the two relevant designs in the MBO(Germany) and MBO(H.K.) catalogue, the designs of the relevant allegedly offending MBO and Defendant's watches and the Cupillard Rieme watch recently bought by Mr. Bland. As a matter of plain commonsense I do not consider that the appearance of any of the other watches can pose any threat to the distinctiveness and exclusivity of the Plaintiff's design.

87. On the other hand I was left in doubt whether damages recoverable under the Plaintiff's reinforced undertaking would be an adequate remedy for the Defendant if it were to succeed in the action. Damages in respect of cancelled orders are admittedly quantifiable with a high degree of accuracy. However there was evidence from both Mr. Brooks and Mr. Bland concerning the loss of credibility which they contended would be suffered by the Defendant if it were injuncted. Mr. Bland had exhibited evidence of complaints already received from two of the Defendant's customers regarding failure to fulfil orders. He had contended in his evidence that there would be future loss of trust in the Defendant by its customers who would be inclined to deal elsewhere on a "once bitten twice shy" principle. It would clearly be very difficult to quantify damage of this nature which could be serious.

88. Considering the balance of convenience further I was reluctant to be guided by decisions in other cases except in so far as they provided me with guidance in principle. In the circumstances of this case, my instinct was to weigh the relative damage that might be suffered by the Defendant if an injunction were to be granted against the relative damage which might be suffered by the Plaintiff if an injunction were refused. This approach seems to have been applied by the English Court of Appeal in Mondaress Ltd. v Bourne & Hollingsworth Ltd. (1981) FSR 118 (C.A.) which was followed in the Court of Appeal in Hong Kong in Salvatore Ferragamo S.P.A. v Knit Studio 58 Ltd. & Another (1982) HKLR 118 (C.A.)

89. As mentioned above the effect of not granting an injunction would, in my judgment, be to permit the likely erosion of the exclusive reputation of the principal model of the Plaintiff with consequential heavy loss to the Plaintiff which would be very difficult to quantify.

90. On the other hand the relative loss to the Defendant if they were further injuncted until trial would be small. They already have 370 models actually appearing in their catalogue and the injunction would only inhibit the sale of the alleged offending model. I have, as appears below, ordered the Plaintiff to reinforce its undertaking as to damages to the extent of HK$1,500,000 and in relative terms this assessment of prospective damage is a modest figure in relation to Mr. Brooks' evidence that the Remex group of companies is reputed to comprise the largest watch assembling concern in Hong Kong and that it has a present turnover of approximately £33.8 million.

91. It was contended by counsel for the Defendant that the Plaintiff had been guilty of delay before bringing these proceedings. I felt unable to accept that contention. There was no evidence before me to suggest that when the Plaintiff brought proceedings against MBO(Germany) and the Defendant in Switzerland in April this year the Plaintiff had evidence against the Defendant to justify the bringing of proceedings in Hong Kong. Moreover there was the evidence of an inquiry agent to show that on the 24th May 1983 an attempt had been made by the Plaintiff to obtain evidence to justify proceedings but the Defendant's employee who dealt with the inquiry agent denied that the Defendant was dealing in watches similar to those of the Plaintiff.

92. Accordingly on the footing that in relative terms the granting of the injunction would cause less damage to the Defendant than the damage which would be caused in relative terms to the Plaintiff if an injunction were refused, I granted the injunction sought subject to the initial holding order referred to at the beginning of this judgment. After hearing the submissions of counsel regarding the likely amount of damage which the Defendant would sustain as a result of the injunction, I ordered the Plaintiff to fortify its undertaking as to damages to the extent of HK$1,500,000.

Representation:

Mr. Andrew Liao instructed by M/s Baker & McKenzie for the Plaintiff

Mr. Clayton instructed by M/s J.S.M. for the Defendant