E and B Giftware Inc. and Another v. Chu Sau Yee Alan and Another
Read the full judgment text of HCA 4598/1986 on BabelCite. This High Court CFI judgment.
1. This is primarily a copyright infringement action. The 2nd Plaintiff ("Tradepower") is the wholly owned Hong Kong subsidiary of an American corporation known as Tradepower Holdings. The latter is a trading company, and the 1st Plaintiff ("E & B") also an American corporation, is one of its customers. Tradepower deals with the export of Hong Kong manufactured products particularly to the United States, and also with the development of new products.
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HCA004598/1986 1986 No. A4598 IN THE SUPREME COURT OF HONG KONG HIGH COURT ___________ BETWEEN
_____________ Coram: The Honourable Mr. Justice Nazareth in Court Date of Hearing: 13th-16th, 22nd-24th April 1987 Date of Delivery of Judgment: 15th May 1987 __________ JUDGMENT __________ Background 1. This is primarily a copyright infringement action. The 2nd Plaintiff ("Tradepower") is the wholly owned Hong Kong subsidiary of an American corporation known as Tradepower Holdings. The latter is a trading company, and the 1st Plaintiff ("E & B") also an American corporation, is one of its customers. Tradepower deals with the export of Hong Kong manufactured products particularly to the United States, and also with the development of new products. 2. In October 1985, E & B personnel held a meeting, which Mr. Sonnenberg, the president of Tradepower Holdings attended, to review the preceding year and to plan for the following year, specifically in regard to new items, particularly gift items. One concept that emerged was that of a small or mini nail dryer, i.e. a device to dry nail vanish by blowing air. The idea of a nail dryer was not new. Tradepower Holdings itself marketed a nail dryer and there was another nail dryer known as "Pretty Neat" or "Pretty Nails" marketed by another corporation. But both those were relatively large, although portable. So E & B got one of their employees, who did that sort of work, to put together and make up a cardboard prototype of a small folding nail dryer. This E & B then passed on to Tradepower Holdings to pursue. At the end of November 1985 Tradepower Holdings sent the cardboard prototype and a "Pretty Nails" sample to Tradepower in Hong Kong to have drawings and plastic mock-ups produced, with instructions and suggestions as to mouldings, colour, the fan motor, gearing and other matters. 3. Tradepower in Hong Kong at that time employed an engineer, Mr. C.K. Wong, to assist with the technical side of producing new products, particularly design and technical drawings. He studied the prototype, the "Pretty Nails" dryer and the instructions and got another employee, Miss Fanny Wong, to produce 3 drawings of what the new product might look like. One of these was chosen and Mr. Wong made a technical drawing about 6 December 1985. From that he got a model maker to make a plastic mock-up about 26 December 1985. About 6 January 1986 Mr. Wong produced a further technical drawing with dimensions and about 22 January got 2 further plastic mock-ups made. Mr. Wong also made 15 other technical design drawings mostly dated March 1986, which he says were the dates of commencement as opposed to completion of work on the drawings. From those drawings moulds were made and production of the Plaintiffs' nail dryer commenced. 4. The 1st Defendant was employed by Tradepower as the manager of its Sundries No. 2 Department, which handled E & B business. For reasons it is not necessary to explore, his employment was terminated at the end of February 1986, prior to which he was on leave for the preceding two weeks. Subsequently the design and mock-ups were approved and the manufacturing process set in train. 5. In July 1986 the attention of Tradepower Holdings was called by very irate E & B staff to an advertisement by the 2nd Defendant in the July issue of Hong Kong Enterprise - a magazine which advertises Hong Kong products. The E & B staff complained of what they, and subsequently the 2nd Plaintiff, considered to be a "knock-off" or copy of their foldable nail dryer. Investigations and enquiries were made by Tradepower and these revealed that the 1st Defendant was a one-third shareholder in the 2nd Defendant and that the 2nd Defendant was incorporated in March, only two weeks after the 1st Defendant's departure from Tradepower at the end of February 1986. That was not all. Also featured in the 2nd Defendant's Hong Kong Enterprise advertisement was a lamp with a British registered design number alongside. Enquiries revealed that the owner of that registered design was none other than Mr. C. K. Wong. The Plaintiffs requested the Defendants to refrain from proceeding with their proposed nail dryer and on failing to obtain assurances in that regard commenced these proceedings. 6. The Plaintiffs claim copyright in -
7. The law applicable by virtue of the Copyright (Hong Kong) Orders 1972 and 1979 (S. I. 1972 No. 1724) is the UK Copyright Act 1956 ("the 1956 Act"). It is common ground that the foregoing items, with one exception are original works; and that that exception does not affect the outcome of this action. The exception relates to one of the 2 later mock-ups, one of which, it is suggested, is not an original work having been simply a copy of the other, or of the earlier. 8. I proceed then to the question of whether copyright subsists in the items claimed. It is not disputed by the Defendants that copyright existed in the drawings. However the Defendants deny that copyright can exist in items like the cardboard prototype and the plastic mockups. The question turns upon whether they are artistic works within the meaning of section 3(1) of the 1956 Act which provides that :
For the Plaintiffs Mr. Thomas Lai submits that the prototype and the plastic mock-ups are artistic works under paragraph (a) both as engravings and sculptures, and also under paragraph (c) as works of artistic craftsmanship. Sculptures 9. "Sculpture" is defined in section 48(1) of the 1956 Act in the following way: "'Sculpture' includes any cast or model for purposes of sculpture." That is not of assistance in the present context. Laddie, Prescott and Vitoria on the Modern Law of Copyright have this to say of the meaning of sculpture at paragraph 3.15:
10. The first sentence is virtually identical to the meaning given in the Concise Oxford Dictionary. I was informed that, surprisingly, there is no authority upon the matter other than the New Zealand case of Wham 0 Manufacturing Co. v Lincoln Industries (1985) RPC 127 in which the New Zealand Court of Appeal referred to various dictionary meanings of "sculpture", an article on the "Art of Sculpture" in the New Encyclopaedia Britannica, Vol. 16 p. 421, and part of the foregoing passage from Laddie, Prescott and Victoria.. Davison C.J. giving the judgment of the court then went on to say :
11. In the light of the foregoing, which I adopt in the absence of other authority, I do not think either the cardboard prototype or the plastic mock-up can be regarded as sculptures. In particular their creators were not concerned with the creation of expressive form in three dimensions or forming a representation of a thing. On the contrary they were concerned simply with utilitarian design of a marketable product. The cardboard prototype seems plainly to have been made by cutting cardboard and sticking the pieces together. And the evidence is that the plastic mock-ups were made by cutting plastic sheets, using lathes and drills and assembling the pieces. These are methods and materials far removed from what was traditional and, in my view militate against the items being sculpture (notwithstanding the sentiment which I would accept in the following passage from the New Encyclopaedia Britannica article reproduced in the Wham 0 judgment:
12. I must nevertheless confess that I find the matter one of some difficulty. It may well be that at some time in the future such mock-ups of the sort in question, which must now be produced in immense numbers, will be accepted by the courts as sculptures. However, I do not think it would be appropriate for this court to initate that step, particularly as adequate protection could quite easily have been achieved by design registration, and as, in my view, such objects are not commonly regarded as sculptures. Engravings 13. I turn then to the question of whether they are engravings. Mr. Lai sought to rely upon the definition of engraving in section 48(1) of the 1956 Act :
Adopting the approach of the New Zealand courts in Wham 0., (which was not departed from by the Hong Kong Court of Appeal in Interlego v Tyco (1986 No. 43) pp. 10, 11, 64, 65) that a die or mould is an "engraving" if made by etching and that the extrusions or models from them come within the category of prints under the New Zealand provision corresponding to the definition of "engraving" in section 48(1), he contends that the plastic mock-ups are engravings and so fall within the definition of artistic work" in section 3(1)A. That may well have been so had the plastic mock-ups been made from moulds that were etched or cut out in some similar manner. But there is no evidence that the moulds were made in that way. On the contrary the evidence here points to the mock-ups preceding any moulds and as having been made directly from plastic sheets by hand. The submission therefore fails. Works of artistic craftsmanship 14. Finally Mr. Lai contended that the cardboard prototype and the plastic mock-ups are "works of artistic craftsmanship". As pointed out in paragraphs 3.21 and 3.22 of Laddie, Prescott and Victoria, the leading case on this expression, i.e. Hensher Ltd. v Restawile (1975) RPC 31, does not provide very clear guidance. In that case the House of lords had to consider whether the prototype of a new range of chairs was a work of artistic craftsmanship. It is convenient to summarise the views of their Lordships, which are by no means uniform or concise, in terms of the headnote at page 32 :
15. Mr. Sonnenberg, the President of Tradepower Holdings who manifestly saw the Plaintiffs' product in quite the most favourable light possible, simply described it as compact, feminine, dainty, designed to appeal to the woman buyer, having a soft oval look, designed to appeal to a woman's aesthetic sense, and having "sizzle" or fashion flair in American trade jargon. Notwithstanding the reference to a woman's aesthetic sense, I did not understand Mr. Sonnenberg to claim that the Plaintiffs' nail dryer had artistic merit. To adopt Viscount Dilhorne's words, I think it would be surprising if he or any other witness had. There vas in fact no, expert evidence led on the point. There was no evidence that any substantial section of the public genuinely admires and values it for its appearance and gets pleasure and satisfaction, or would do so, from looking at the Plaintiffs' product; and I doubt the public would, having regard to the nature and appearance of the object. I doubt also whether the product could be termed "artistic" in the ordinary sense of that word. And finally I am satisfied on the evidence that those who created it were certainly not consciously concerned to produce a work of art or even something artistic; they were concerned to produce something utilitarian, something that would sell to women. In my judgment, therefore, the prototype and mock-ups were not works of artistic craftsmanship. 16. Accordingly they do not fall within the meaning of "artistic work" in section 3(1) and cannot be the subject of copyright pursuant to that definition. Before leaving the point I should record that it was common ground that with the exception of one of the latter 2 mock-ups, the prototype and the other mock-ups were original works. Infringement 17. I turn then to the question of whether the Defendants infringed the copyright which it was rightly conceded the Plaintiffs' owned in the drawings produced by Mr. Wong and Miss Fanny Wong. The Plaintiffs' averments that fall to be considered are:
The first of these averments does not constitute infringement of copyright and was not pursued. As to the second and third averments, it is common ground that infringement turns upon 2 elements. First the objective similarity of the Defendants' nail dryer with that of the Plaintiffs' as depicted by the drawings and mock-ups and, second, the causal connection i.e. in practical terms whether the latter was copied (Francis Day and Hunter v. Bron (1963) 1 Ch 587) Objective similarity 18. It was submitted by Mr. Garland, if I understood him rightly, that objective similarity was to be determined by the evidence of experts. It is obvious from some of cases to which reference was made, that the courts have indeed relied upon such evidence. But it is equally clear that the courts also rely upon their own observations and assessment. (see King Features Syndicate Inc. V. O & M Kleeman (1941) AC 417, 435, 436; Francis Day and Hunter v. Bron (1963) Ch 587, 615). 19. Now the only expert evidence, if it can be called that, of similarity carpe from Mr. Sonnenberg, the president of Tradepower Holdings, from Mr. Dominic Chan, the Tradepower employee who replaced the 1st Defendant and from Mr. Lee Hoi Kwan the designer used by the Defendants. Mr. Sonnenberg's view that the Defendants' product was a "knock-off" or copy of the Plaintiffs' product rested largely upon the shape of the 2 products and indeed the way in which they were presented in the relevant advertisements. I do not attach much weight to Mr. Sonnenberg's opinion; besides being an interested party he obviously felt very strongly that a disloyal employee had "knocked him off" essentially by stealing the E & B idea. As to Mr. Dominic Chan, in examination in chief, he seemed to think the products were similar; "very close" was the expression he used. But when taxed in cross-examination, he was only too ready to agree that they were not close. This was in relation to the drawings. To the court he explained his change of view by saying he examined the drawings closely when cross-examined by counsel. I did not find his evidence and views particularly convincing. Finally Mr. Lee Hoi Kwan, the designer, who gave evidence for the Defendants admitted in cross examination that the Plaintiffs' and Defendants' products looked quite similar, were very close in dimensions, when folded were quite similar in shape, curving at both ends and when unfolded looked quite similar, with very similar heights and both with platforms and back plates. 20. Turning to the plastic mock-ups themselves, one cannot help noticing immediately the striking similarity between the two products. Not only are the external shapes and format very similar, indeed identical in some respects, but so are the dimensions. Merely to look at the Defendants' product is to receive an over whelming impression of the Plaintiffs' model or to think that perhaps one had come from the other to use the words of the trial judge Wilberforce J. (as he then was), quoted with approval by Wilmer L.J. on appeal in Francis Day & Hunter v. Bron (1963) 1 Ch 578 at 610. The differently shaped air in-take grille of the Defendants' model in no way removes that impression, nor does the fact that the platform of the Defendants' model opens outwards through some 270º while that of the Plaintiff only drops some 90º. Those features of the Defendants nail dryer strike me as just the sort that might be incorporated to suggest differences from the Plaintiffs' product and in my view they do not mask the striking and substantial similarity of the two. In this context I find the words of Mr. Lee Hoi Kwan the designer employed by the Defendants to design their product of significance. He said "I could not copy because there might be litigation. You cannot copy exactly people's design." 21. Also of significance were some almost identical features of the drawings. Like those of the Plaintiffs', the Defendants' drawings depict a fan with 6 blades and having precisely the same diameter of 54mm. There were other very similar dimensions. In my finding there is clearly a very high degree of objective similarity between the two products. 22. But, of course, it is the infringement of the Plaintiff's drawings that remains in question, not that of the prototype and mock-ups, since the latter in my finding are not works of artistic craftsmanship. Whitford J in the L.B. (Plastics) case at page 571 accepted that copying must be tested separately against each drawing relied upon. That was also accepted by Clough J.A. in the Interlego v Tyco case at page 132. Regrettably in this case no conscious attempt was been made to test the alleged infringement against the Plaintiffs' 17 drawings that are relied upon. Nonetheless it is a fair conclusion from the evidence that the Plaintiffs' products are an accurate three dimensional representation of the Plaintiffs drawings, and from the obvious similarity between the Plaintiffs' products and the Defendants product, that the latter is a substantial reproduction of the Plaintiffs' drawings. In these circumstances I think it proper that I should myself make the comparison as Clough J.A. did in not dissimilar circumstances. Fortunately the drawings are simple, and readily reveal the shape, format and dimensions of the Plaintiffs product. There is no difficulty in immediately recognising the obvious similarity in shape and format in those drawings that depict these. As to dimensions, as I have indicated, I am satisfied on the evidence that these were accurately reproduced in the Plaintiffs products which are quite obviously very similar in dimensions to the Defendants' product. There was in addition some evidence of the coincidence and similarity of particular dimensions in the Defendants' drawings and the Plaintiffs' drawing, of which I am satisfied their respective products are accurate three dimensional representations. I should mention at this point that the Defendants' product, the single mock-up that was produced and portrayed in the Hong Kong Enterprise, was not a working model. It simply did not contain many of the working features of the Plaintiffs' product shown in some of the drawings. For that reason in my finding many of the Plaintiff's drawings of those features were not reproduced. Upon the foregoing basis the following drawings identified by description and Exhibit Numbers, revealed an obvious and very substantial similarity :-
The remaining drawings, concerned with small parts, some being internal, and also identified by description and Exhibit Numbers, did not reveal similarity :-
Causal connection 23. I turn then to the causal connection between the Plaintiffs' and Defendants' products. The 1st Defendant was, as I have said, the manager of the Sundries No. 2 Department of Tradepower which handled the E & B account. It was the 1st Defendant who corresponded with E & B and it was his responsibility to take follow-up action. He does not deny that he saw the cardboard prototype and at least one plastic mock-up, although he says he only caught sight of it. But he suggests that his involvement with the Plaintiffs' foldable nail dryer was minimal and that he did not see the drawings. On the evidence it is in my view most likely that the last lot of drawings were commenced, contrary to the 1st Defendant's submissions, before he left Tradepower. His denials that he was involved in any but the most minor degree with the Plaintiffs' nail dryer, the drawings, and the Tradepower engineer, Mr. C.K. Wong who produced those drawings rang hollow. The 1st Defendant was evasive and manifestly ill at ease when questioned about the formation of the 2nd Defendant, which could only have been planned and indeed set in train while he was still in the service of Tradepower, albeit on leave for the last fortnight. Notwithstanding his denials of any close association with Mr. C.K. Wong, in my view he could not have avoided working fairly closely with him on products for. Which his department was responsibile. Moreover no satisfactory explanation was forthcoming from either him or Mr. Wong as to how the lamp, the registered design of which turned out to belong to Mr. Wong, came to be included in the 2nd Defendants' advertisement in the Hong Kong Enterprise which featured its nail dryer. Mr. Wong had the audacity to say he did not know. I find it simply too much of a coincidence and wholly incredible that Mr. Lee Hoi Kwan simply stumbled upon almost the same size, shape and format of product and even produced drawings of a fan with the identical diameter i.e. 54mm; no explanation for this either was forthcoming. There was some suggestion that both the Plaintiffs' and the Defendantds' products were inspired by a common source i.e. the Pretty Nails dryer. But there was no evidence to the effect and certainly it did not seen to me from the appearance of the different nail dryers that such common inspiration could account for the striking general similarity between the rival products. It does not seem to me nor was there any evidence to the effect that working from the Pretty Nails dryer with the object of producing a mini foldable nail dryer would necessarily or even probably result in the shape, format and particularly the dimensions of the rival nail dryer. Mr. Lee Hoi Kwan was himself prepared to attribute these to coincidence. In the light of the foregoing, their mutual efforts to play down their association, the 1st Defendants involvement in and access to the Plaintiffs' nail dryer and of their demeanor I do not believe the 1st Defendant and Mr. Wong and reject their evidence. I have no doubt that they were in league and were the means whereby the Defendants and their designer and mock-up maker were able to produce a mock-up sample so strikingly similar to the Plaintiffs' product. The causal connection, indeed the conclusion that the Plaintiffs' nail dryer represented in their drawings and mock-ups was copied is overwhelming and inescapable on the evidence. 24. It is accordingly not necessary to rely upon the shift in evidential burden that follows from the striking similarity of the two products (see King Features Syndicate Inc. v O & M Kleeman at page 436), notwithstanding that such a shift does seem to me to arise, and notwithstanding that the Defendants have not discharged that burden. On the contrary, on the evidence in my finding the probability is that the 1st Defendant not only took the Plaintiffs' idea of a mini foldable nail dryer but also substantially the Plaintiffs? embodyment of that idea in their drawings and plastic mock-ups. In my judgment in himself causing the Plaintiffs' nai1 dryer to be reproduced to the striking and substantial degree that I have found, the 1st Defendant infringed the Plaintiffs' copyright in their drawings. 25. As to the 2nd Defendant, it is common ground that any infringement by it in offering its product for sale would be secondary, and that in consequence knowledge of the Plaintiffs' copyright would be essential. The evidence indicates that of the shareholders of the 2nd Defendant only the 1st Defendant was active; indeed he admitted that of the other two shareholders one was the non-active provider of finance and the other his equally inactive nominee. Not to ascribe the let Defendants knowledge to the 2nd Defendant would in the particular circumstances be absurd. Upon the basis that it was the 1st Defendant who ran the 2nd Defendant company, in my judgment, the 2nd Defendant had knowledge of the Plaintiffs' copyright, and infringed that copyright in offering for sale its infringing nail dryer without the authority of the plaintiffs. The United Kingdom Designs (Protection) Ordinance, Cap. 44 26. I turn finally to Mr. Garland's submission that the 2nd Defendant having obtained U.K. design registration of its nail dryer, is saved from liability by the provisions of the United Kingdom Designs (Protection) Ordinance, Cap. 44. The argument was this. Section 2 of the Ordinance confers upon the proprietor of a design registered in the United Kingdom, the like privileges and rights as if the Certificate of Registration had been issued with an extension to Hong Kong. Under section 7 of the 1956 Act, those privileges and rights include the exclusive right in the United Kingdom (and in Hong Kong by extension) to make, sell, and offer for sale etc. any article in respect of which the design is registered. However as Mr. Thomas Lai for the Plaintiffs pointed out, section 4 of the Ordinance enpowers the court upon application of any person who alleges that his interests have been prejudicially affected to declare that exclusive privileges and rights in the design have not been acquired in Hong Kong if there was publication of the design in Hong Kong prior to the date of registration of the Defendants' design in the United Kingdom. The date of registration of the Defendants' design in the United Kingdom was 12th November 1986. The evidence shows that the manufacture of the Plaintiffs' foldable nail dryer had already been set in train in February 1986 and that an advertisement for it including a photograph was in a catalogue which war directed at 1986 Christmas sales and must therefore have been circulated months before. The clear pro-bability is that there was publication in Hong Kong before 12th November 1986. Therefore treating Mr. Lai's submission as an application under section 4, I would declare that exclusive privileges and rights in the design have not been acquired in Hong Kong under the provisions of Cap. 44. Accordingly the provisions of Cap. 44 do not save the Defendants from liability for infringement of the Plaintiffs' copyright. Breach of contractual duty of non-disclosure 27. Finally I come to the Plaintiffs' claim for breach of the 1st Defendant's contractual duty of non-disclosure. The Plaintiffs claim that "it was an expressed or alternatively implied term of the contract of employment between the 2nd Plaintiff and the 1st Defendant that the latter would not disclose confidential information obtained by him in the course of and as a result of his employment or otherwise exploit or utilize the same information to the detriment of the 2nd Plaintiff." 28. Paragraph (10) of the 1st Defendant's contract of employment comprised by his letter of appointment provides that "it is clearly understood by you that the acceptance of employment by Tradepower (HK) Ltd. constitutes your agreement not to disclose to anyone any information about Company business, or Company secrets of any type, whether or not you believe such parties to whom such information is given will act against our Company's interests...". 29. I think it an inescapable inference of the circumstances I have already outlined that the 1st Defendant gave the 2nd Defendant and Mr. Lee Hoi Kwan some confidential information about the Plaintiffs' product whereby the 2nd Defendant was able to procure the design of its strikingly similar foldable nail dryer. It is just possible that the 1st Defendant got Mr. C.K. Wong to do so but even so, the overwhelming probability is that he himself imparted at some information to Mr. Lee Hoi Kwan in instructing him as to the sort of product to be designed. It is submitted on the 1st Defendant's behalf that he might have done so after leaving the Plaintiffs' service. The answer to that is there is nothing on the face of Clause 10 to suggest that its operation is limited to the period of service and clearly Clause 10 would be rendered largely nugatory if all the employee had to do was to terminate his service and then be free to divulge confidential information. No authority directly in point was cited to me. However it is clear from Merryweather v Moore (1892) 2 Ch 518, that the ordinary implied obligation of confidence continues beyond termination of a contract of service. In my view it is implicit that the obligation continues to bind the 2nd Defendant after termination of his contract of service in respect of information acquired during that service. In my judgment, therefore, the 1st Defendant is in breach of Clause 10 of his contract as claimed. 30. I should add that it was also sought to found liability upon general equitable principles of liability for disclosure of confidential information. But this was not pleaded and in my view it is therefore not open to the Plaintiffs to rely upon it. Decision 31. For all the foregoing reasons I find for the Plaintiffs in respect of both infringement of the Plaintiffs' copyright in the drawings I have specified and breach of the 1st Defendant's obligation of confidence under his contract of employment. In consequence of the early ex parte interlocutory injunction restraining the Defendants, the Plaintiffs have not suffered any damages. I accordingly award them against the Defendants jointly and severally nominal damages of $500. I will now hear counsel upon the terms of the orders prayed for i.e. orders for injunctions to restrain the Defendants and for disclosure and delivery up. I will also hear counsel as to costs.
Representation: Mr. Thomas Lai instructed by Messrs. S.K. Wong & Co. for Plaintiffs. Mr. Peter Garland instructed by Messrs. Augustine C.Y. Tong & Co. for Defendants. |