Aqua-leisure Industries, Inc. and Another v. Impag Toys Europe Bv and Others
Read the full judgment text of HCA 3933/2000 on BabelCite. This High Court CFI judgment was delivered on 4 May 2006.
1. This is an action for infringement of registered trade marks and for passing off.
Cited by 2 cases · Cites 2 cases
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HCA 3933/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 3933 OF 2000 ______________________ BETWEEN
Before : Hon Sakhrani J in Court Date of Hearing : 23-27 January 2006, 1-3, 6-10, 13-15, 17, 20-23 February 2006, 8-10, 13-15 March 2006 Date of Judgment : 4 May 2006 ______________________ JUDGMENT ______________________ 1.This is an action for infringement of registered trade marks and for passing off. The plaintiffs 2.The 1st plaintiff is a corporation organized and existing under the laws of Massachusetts in the United States of America (“USA”). 3.Since 1970 the 1st plaintiff has been carrying on the business of producing, marketing, selling and supplying swim products including inflatable toys, playthings and buoyancy devices for swimming pool or beach use, inflatable and plastic pools, masks, goggles and flippers, swim and dive gear and other pool accessories and games (“the swim products”). 4.The majority of the 1st plaintiff’s customers are in the USA. Its main customers are and have been the large retail chain department stores including Walmart, Toys “R” Us, Target, K-Mart, Kay Bee Toys, Fred Meyer, Costco, CVS, Leslie’s Pools and Sports Authority. 5.Apart from the USA the 1st plaintiff also has a broad range of overseas customers in around 27 countries including Australia, Canada, China, United Kingdom, some European and Middle Eastern countries. 6.Since about 1991, the 1st plaintiff has marketed, sold and supplied the swim products under various trade marks worldwide most of which are styled with the “Aqua” mark including “Aqua”, “Aqua Leisure”, “Aqua SwimSchool”, “AquaFitness”, “Aqua Splash Action”, “Aqua World Class Swimgear” and “Aqua America’s favorite swimgear”. The 1st plaintiff has been marketing and selling the swim products in the USA, Canada and South America. 7.The 2nd plaintiff is a limited liability company incorporated in Hong Kong in December 1984. It is and has at all material times been a subsidiary of the 1st plaintiff. The 2nd plaintiff is and has been responsible for the production and merchandising of the swim products in Hong Kong and the Mainland for the 1st plaintiff. The shipments would be arranged by the 2nd plaintiff from Hong Kong or the Mainland. 8.The 2nd plaintiff has also been marketing and selling the swim products with trade marks incorporating the mark “Aqua” to countries outside the USA, Canada, and South America. The 2nd plaintiff has also at all material times maintained a showroom at its offices in Hong Kong. The registered trade marks 9.The 1st plaintiff is the registered proprietor in Hong Kong of the following registered trade marks in Part A of the register :
10.In respect of each of the “Aqua” trade marks, the entry in the register stated :
This statement did not appear in the entries in respect of the “Aqua LEISURE” trade marks. 11.In respect of each of the “Aqua LEISURE” trade marks there was a disclaimer of the word “LEISURE”. The entry in the register provided that :
12.The application for the registration of each of the trade marks was granted on 30 December 1999. However, the relevant date is 24 July 1998 this being the date of the application for the registration of each of the trade marks. The trade marks were thus registered as of 24 July 1998. 13.The registered trade marks have a stylized rendering of the word “Aqua” which is unique to the 1st plaintiff. This stylization has been used by the 1st plaintiff since about 1991. In this stylized version, the letter “A” is capitalized and the letters are displayed in a blue-green colour. The word “Aqua” is underlined by a slanting line upwards from left to right. In the case of the “Aqua LEISURE” trade marks, the word “Aqua” is in the same stylized version as in the “Aqua” trade marks and the word “LEISURE” is in a much smaller font and follows the slanting line under the word “Aqua”. 14.The 1st plaintiff has registered or applied to register the same unique stylization of the word “Aqua” in trade mark registrations in a number of countries. These included Argentina, Canada, Czech Republic, France, Germany, Hungary, Israel, Italy, Poland, Slovakia, Spain, the United Kingdom and the USA. The defendants 15.The 1st ,2nd, 3rd and 6th defendants are and were at all material times companies in the same group with the ultimate holding company known as Beheermij Woldendorp B.V. (“BWBV”), a corporation organized and existing under the laws of the Netherlands. The 4th defendant Geert De Vries (“De Vries”) is the ultimate owner and controller of BWBV. 16.The 1st defendant is a corporation organized and existing under the laws of the Netherlands and incorporated in 1976. It is wholly owned by BWBV. De Vries is the founder and President of the 1st defendant. 17.The 1st defendant is and has at all material times been a developer and trader of a wide variety of toy products. The 1st defendant sells primarily to European customers although it also sells to other countries worldwide. 18.The 1st defendant began importing toys from Hong Kong in 1980 and subsequently from the Mainland and Taiwan. 19.The 1st defendant began selling inflatable swimming toys and related accessories in the early 1980s. At that time the 1st defendant bought primarily from the market leader and international producer of inflatables swimming pools and toys namely, Intex Recreation (“Intex”). It also sourced from other suppliers a limited number of products and accessories not produced by Intex but Intex was the main supplier of the inflatables swimming pools and accessories sold by the 1st defendant. 20.As the 1st defendant was purchasing goods from Asia it became necessary to establish an office and showroom in Hong Kong for handling goods purchased in Hong Kong and the Mainland. This led to the setting up of the 2nd defendant. 21.The 2nd defendant is a limited liability company incorporated in Hong Kong on 25 August 1992. The 2nd defendant was established as a Hong Kong subsidiary of the 1st defendant. BWBV held the majority of the shares in the 2nd defendant. 22.The 3rd defendant is a limited liability company incorporated in Hong Kong on 14 November 1995. It is and has at all material times been a developer and trader of educational toys and creative products. The 2nd defendant is and was a director and the majority shareholder of the 3rd defendant. 23.The 5th defendant Connie Lin (“Lin”) became a 10% shareholder of the 2nd defendant and was appointed general manager of the 2nd defendant with the establishment of the 2nd defendant. Lin also became a director of the 2nd defendant on incorporation and remained so until her resignation in about December 2001. 24.The 6th defendant is a limited liability company incorporated in Hong Kong on 13 March 1998. The name of the 6th defendant was Aqua Splash Limited. The 6th defendant had its principal place of business at an office in Tsimshatsui, Kowloon, Hong Kong. It had carried on the business of marketing, selling and supplying swim products under and by reference to the mark “Aqua Splash”. The majority of the shareholding of the 6th defendant was held by the 2nd defendant. Lin was also a shareholder and director of the 6th defendant. The 6th defendant was dissolved in November 2001. 25.In October 1998 the 6th defendant distributed catalogues featuring the mark “Aqua Splash” in relation to swim products (“Aqua Splash swim products”) at the Hong Kong International Toys and Gifts Show (“HKITGS”). 26.The 6th defendant has also sold swim products under the mark “Aqua Splash” to, inter alia, the 1st defendant. It is undisputed that between sometime in October 1998 and the end of June 1999 the 6th defendant sold Aqua Splash swim products to the value of over HK$26m. of which about half were sold to the 1st defendant. 27.As a result of the 6th defendant’s activities, the plaintiffs instituted HCA No. 18928 of 1998 (“the earlier action”) against the 6th defendant for passing off. At that time the plaintiffs had not yet obtained the said registrations of the trade marks in Hong Kong and no claim for infringement of trade marks was made in the earlier action. 28.Interlocutory judgment in default of defence was entered against the 6th defendant in the earlier action on 14 May 1999 by the order of Keith J (as he then was). 29.On 2 July 1999 the 6th defendant changed its name to Splash Limited. 30.On 14 April 2000 this action was instituted against the 1st,2nd, 3rd and 6th defendants, together with Lin as the 5th defendant. De Vries was subsequently joined as the 4th defendant in this action on 20 September 2001. 31.On 30 November 2000 the 6th defendant was placed in voluntary liquidation. On 1 November 2001 the 6th defendant was dissolved. 32.On 20 September 2002 the plaintiffs were granted leave to discontinue this action against the 6th defendant. 33.On 24 November 2003 the plaintiffs entered into a settlement agreement with Lin. On 5 December 2003 the plaintiffs were given leave to withdraw all claims against Lin. 34.The plaintiffs’ case is that the 6th defendant has infringed the 1st plaintiff’s registered trade marks by using the mark “Aqua Splash” being a mark nearly resembling each of the 1st plaintiff’s registered trade marks in the course of trade in relation to goods. The plaintiffs’ case is that the 6th defendant has also passed off its business and products as and for the business and products of the plaintiffs. 35.It is the plaintiffs’ case that the 6th defendant was the primary tortfeasor. The case against the 1st, 2nd, 3rd defendants and De Vries is that they were joint tortfeasors with the 6th defendant in that they and each of them procured, authorized, directed, caused, enabled and/or assisted the 6th defendant to commit the acts of trade mark infringement and passing off and/or acted in concert with the 6th defendant to commit the said acts pursuant to a common design. The agreed issues 36.The agreed issues are those as set out in the agreed list of issues. These are as follows : Trade mark Infringement 1. Have the 1st plaintiff’s registered “Aqua” and “Aqua LEISURE” trade marks been infringed? Validity of trade marks 2. Are and have the registrations of the 1st plaintiff’s registered trade marks always been invalid on the ground that each registration is an entry entered in the register without sufficient cause in that each of the registered trade marks was not when registered (and continues not to be) a trade mark registrable under s. 9 of the Trade Marks Ordinance (Cap.43) in that :-
3. Should the 1st plaintiff’s trade mark registrations be expunged or varied in exercise of the Court’s discretion under s. 48 of the Trade Marks Ordinance? Passing Off 4. Have the “Aqua” trade marks (as defined in para. 5 of the re-re-re-amended statement of claim), and in particular “Aqua”, come to be recognized by the trade and public in Hong Kong and other places where the plaintiffs’ swim products have been marketed and sold (“the Relevant Territories”) as exclusively distinctive of the plaintiffs’ products? 5. Are and were the 1st and/or 2nd plaintiffs at all material times the owners of the goodwill attached to the reputation in the “Aqua” trade marks in Hong Kong and in the Relevant Territories? 6. Did the use of the trade mark and trade name “Aqua Splash” constitute passing off?
7. Has any damage resulted to the plaintiffs as a result of the alleged acts of passing off? Joint tortfeasorship 8. Were the 1st, 2nd, 3rd defendants and De Vries joint tortfeasors with the 6th defendant?” Validity of the registered trade marks 37.It seems to me that the first matter to consider is the validity of the trade marks under Issue 2. 38.There is no dispute that the 6th defendant has promoted, offered and exposed for sale, supplied and marketed and sold swim products in Hong Kong under and by reference to the mark “Aqua Splash”. 39.The 1st plaintiff is the registered proprietor of the said “Aqua” and “Aqua LEISURE” trade marks with effect from 24 July 1998. However, the defendants dispute the validity of the trade marks. 40.The governing trade mark legislation in Hong Kong since 4 April 2003 is the new Trade Marks Ordinance (Cap. 559). However, as the alleged infringements were committed before the commencement date of the new Trade Marks Ordinance (Cap. 559), it is common ground between the parties that the issues of infringement and validity of the registered trade marks have to be decided under the old Trade Marks Ordinance (Cap. 43) (“the TMO”). 41.The sections referred to in this judgment are to sections in the TMO. 42.The fact that a person is registered as proprietor of the trade marks is prima facie evidence of the validity of the original registrations of the trade marks (s. 29). 43.By the re-re-amended particulars of objections of the defendants, they plead that :
44.The defendants counterclaim for an order that the register of trade marks be rectified by cancelling and expunging therefrom the entries relating to the 1st plaintiff’s trade marks alternatively, for an order that each entry be varied so that the 1st plaintiff be required to disclaim any right to the exclusive use of any part of each of the 1st plaintiff’s trade marks as a condition to each such mark being permitted to remain on the register. 45.S. 48(1)(a) gives the Court a discretion to expunge or vary an entry made in the register without sufficient cause or wrongly remaining on the register. 46.The burden is on the defendants to satisfy the Court of the matters particularized in the re-re-amended particulars of objections. 47.A trade mark relating to goods is defined in s. 2(1) as :
48.The purpose of a trade mark is and always has been to indicate origin. However, origin is not and never has been confined to manufacturing origin. It includes selection and offering for sale. (Stichting Greenpeace Council v. Income Team Ltd t/a Green Peace and others [1996] 1 HKLR 269) 49.It is clear that use as a trade mark relating to goods means use in a way which is indicative of the origin of the goods in the sense of their manufacture, sale or selection, as opposed to being indicative of their character or quality or other processes carried out on them such as repair. 50.S. 9 provides that a trade mark to be registrable in Part A of the register shall contain or consist of at least one of the following essential particulars :
51.To qualify for registration in Part A the mark must not only satisfy at least one of the requirements of (a) to (e) of s. 9(1), it must also be distinctive (Re NV Sumatra Tobacco Trading Co. of Indonesia [2000] 3 HKC 651 at 655). This is obvious by the use of the words “any other distinctive mark” in s. 9(1)(e). 52.It is common ground that ss. 9(1)(a), (b) and (c) have no relevance in this action. The relevant essential particulars are those in (d) and (e) of s. 9(1). S. 9(1)(d) 53.As regards the two “Aqua” trade marks, registration No. 17128 of 1999 was in respect of inflatable swimming pools; floating playthings, flippers and fins in Class 28 and registration No. 17129 of 1999 was in respect of diver’s masks, swimming goggles, snorkels, buoyancy aids and floats in Class 9. There can be no doubt that all the goods specified under both registrations are swim or water-related products. 54.The defendants contend that the word “aqua” has a direct reference to the character or quality of the goods in respect of which the two “Aqua” trade marks have been registered. In the circumstances it is contended by the defendants that in respect of both these registrations, the word “aqua” did not qualify for registration under s. 9(1)(d). 55.It is clear that the word must have a direct reference to the character or quality of the goods to disqualify it for registration under s. 9(1)(d) (WEATHERSHIELDS Trade Mark [1991] RPC 451). Dictionary entries 56.The defendants’ case is that the word “aqua” has found its way into the English dictionaries and is now and was in 1998 an English word for ‘water’. The plaintiffs’ case is that the word “Aqua” is a foreign word namely, a Latin word for ‘water’ and is not part of the English language. 57.To support the contention that the word “aqua” is now and was in 1998 an English word, Mr. Yan SC, for the defendants, referred me to the 3rd edition of the Shorter Oxford English Dictionary published in 1944 and to subsequent editions. 58.The 3rd edition of the Shorter Oxford English Dictionary published in 1944 defines “aqua” as :
There is a sign with two vertical strokes before the word “aqua”. This means that the word was not naturalized and that it was an alien word. 59.The next Oxford dictionary that I was referred to was the 2nd edition of the Oxford English Dictionary published in 1989. The first definition given there for “aqua” is :
There was also a sign with two vertical strokes before the word “aqua”; this meant that the word was not naturalized and that it was an alien word. 60.There was also another definition of the word “aqua-” i.e. the word ‘aqua’ with a hyphen. It was defined as :
It is important to observe that there is no sign with two vertical strokes before this entry to suggest that this was an alien word. So it seems that even in the 2nd edition of the Oxford English Dictionary published in 1989 the word “aqua-”, i.e. the word “aqua” with a hyphen, was not regarded as an alien word but that it was regarded as an English word. The “L” in the definition simply meant that its etymology was Latin. 61.In the 2nd edition of the Oxford English Dictionary, the definition of “aquatic” includes the following :
62.I was also referred to the 4th edition of the New Shorter Oxford English Dictionary published in 1993. This is the edition printed after the 3rd edition which was then called the Shorter Oxford English Dictionary in 1944. In 1993 it was called the New Shorter Oxford English Dictionary instead of the Shorter Oxford English Dictionary. 63.In the 4thedition the word “aqua” is said to be a noun and is defined as :
The abbreviation ‘gen.’ meant generally and ‘L.20’ meant late 20th century. The letter ‘L’ in square brackets meant that the word’s etymology was Latin. It is clear, therefore, that in this edition the word “aqua” is no longer said to be an alien word. It seems that the word “aqua” has found its way into the English language according to this edition of the New Shorter Oxford English Dictionary. 64.As for the word “aqua-” i.e. the word “aqua” with a hyphen, the definition in the 4th edition is :
This means that it is a word in a combining form with a Latin root, forming nouns with the sense of ‘water’ especially with reference to aquatic entertainment. 65.In this edition of the New Shorter Oxford English Dictionary the word “aquatic” is defined as :
66.In the 5th Edition of the Shorter Oxford English Dictionary published in 2002 (then renamed Shorter Oxford English Dictionary from the New Shorter Oxford Dictionary), the definition of “aqua” includes the following definition :
The abbreviation ‘gen.’ meant generally and “L. 20” meant late 20th century (from 1970-1999). The word “aqua-” i.e. the word “aqua” with a hyphen is defined as :
67.Thus the clear difference in the definition of “aqua” in the earlier 3rd edition published in 1944 and the subsequent 4th and 5th editions published in 1993 and 2002 of the Shorter Oxford English Dictionary, which was called the New Shorter Oxford English Dictionary in 1993 and renamed the Shorter Oxford English Dictionary in 2002, is that in the editions published in 1993 and subsequently the word “aqua” was no longer said to be the Latin word for water but that it had meant water generally since 1970 to 1999 and that its etymology was Latin. 68.The above dictionary entries strongly support the view that the word “aqua” has become an English word as from the late 20th century i.e. from 1970 to 1999. 69.Mr. Garland, SC, for the plaintiff, however, disputed that the word “aqua” was an English word. He maintained that it was a Latin word and relied on the entry in the Oxford English Dictionary 2nd Edition, the 1989 publication as set out above at para. 59. 70.There is some support for this view in the Chambers Dictionary published in 1998 which defines the word “aqua” as a noun meaning water with the letter ‘L’ in brackets. This signifies that the word was still regarded as a foreign word, rather than as a naturalized English word. 71.Mr. Garland, however, accepted that the word “aqua-” i.e. the word “aqua” with a hyphen is a word which has come to be incorporated into the English language though it has Latin roots. He also accepted that the word “aquatic” has become an English word. 72.It is not necessary to refer to all the other dictionary entries that I have been referred to. Suffice it to say that there is strong support for the submission of Mr. Yan that the word “aqua” has become an English word as from 1970 although there is also some support for the view put forward by Mr. Garland that it is a foreign word. There can be no doubt, however, that the word “aqua-” i.e. the word “aqua” with a hyphen and the word “aquatic” have become English words with Latin roots. 73.In any event it seems to me that it matters not whether the word “aqua” has become an English word. The question is whether in Hong Kong it has by 1998 been commonly regarded and understood by the public as a word meaning water. 74.I would observe that in Beecham Group Ltd.’s Application, an unreported decision of Mr. Murphy dated 12 November 1976, the applicant applied to register in Hong Kong the mark “AQUAFRESH And Device” in Class 3 in respect of anti-perspirants, perfumes, non-medicated toilet preparations; cosmetic preparations, dentifrices, shampoos and soaps. It was held that the public in Hong Kong were familiar with the word “aqua” as meaning water. The mark was rejected for registration. 75.The evidence of some of the witnesses also shows that in the 1990s the word “aqua” was commonly understood as meaning water. This was what the plaintiffs’ witnesses Raymond Ferretti, Kathryn Re, Lin, Terrence Doyle and Sue Chow, the sales manager of the 2nd plaintiff at all material times, understood the word “aqua” to mean. Steven Berenson (“Berenson”), the President of the 1st plaintiff, however, said that although he knew that “aqua” meant water he was of the view that it was not commonly used that way. 76.Sue Chow agreed that “Aqua-Leisure” was quite an appropriate name for describing the sort of products that the 1st plaintiff dealt in. She herself had come across the use of the word “aqua” on many occasions in relation to water-related products. 77.Berenson accepted that the name “Aqua-Leisure” meant “water leisure” and that “Aqua Games” refer to water or aquatic games. Berenson also said that the mark “Aqua Explorer” in relation to diving masks conveyed the idea that a person who wanted to explore water would wear such equipment. Berenson also agreed that on the material that had been drawn to his attention in evidence there had been a fair amount of use of the word “aqua” in relation to swim and aquatic activity related products and that in some cases the word “aqua” referred to the type of business that the various companies which had made use of the word “aqua” dealt in. 78.Paul Hoiriis (“Hoiriis”), the Vice-President and Chief Financial Officer of the 1st plaintiff and a director of the 2nd plaintiff, also agreed that the name of the products “AquaDisc” and “AquaSkimmer” indicated that the toys were to be played in water. He also agreed that the name of the company Aquatoy Inc. indicated that the company deals in toys which are played in water. 79.There is also an abundance of evidence to show that the word “aqua” is used on and in relation to water-related products and/or businesses to refer to water and to describe them as being water-related products. These have been particularised in the written final submissions of the defendant. However, I shall refer to only some of them. These include :
80.It is significant that the 1st plaintiff has an almost identical product to the “Aqua Basketball” which it calls “Water Basketball”. This can be found in the 1st plaintiff’s Swimgear and Water Games 1996 Catalogue where the product SA-1009 is called an “Advanced Flotation Water Basketball”. 81.It is also significant that the plaintiffs themselves have used the words “aquatic” and “aqua” interchangeably. An example of this can be found in the plaintiffs’ own document namely, the 2nd plaintiff’s detailed breakdown of sales for 1993 where the item no. ET9000 for the product “Aquatic Tot Trainer” is used interchangeably with “Aqua Tot Trainer”. The plaintiffs have themselves described the products that they deal in as “aquatic leisure” products as can be seen from the statement of claim dated 2 July 1999 of the 1st plaintiff filed with the Donguan Technical Supervision Bureau in the Mainland. 82.I am also entitled to have regard to my own knowledge of the use of the word “aqua” in Hong Kong in July 1998. I have no doubt that the consuming public in Hong Kong commonly regard and understand that the word “aqua” means water and that was also the position as at July 1998. 83.The Registrar in dealing with the applications for the registration of the two “Aqua” marks rejected the applications under s. 9(1)(d). The Registrar in a letter dated 30 January 1999 signed by Miss Florence Lai took the objection, inter alia, that the trade mark “Aqua” was descriptive of the goods in the sense that the goods are used for aquatics. The solicitors for the 1st plaintiff did not dispute this in their reply of 9 June 1999 but instead presented evidence of the use of the mark “Aqua” thereby relying on s. 9(1)(e). The Registrar in a subsequent letter dated 29 June 1999 signed by a different officer Ms Fok stated that she was satisfied that the mark was deemed to be distinctive of the 1st plaintiff’s goods and accepted the “Aqua” trade marks for registration under s. 9(1)(e). This necessarily meant that the marks were not suitable for registration under s. 9(1)(d). The reason must have been that the marks had a direct reference to the character or quality of the goods. 84.It is clear that the Registrar considered that the two “Aqua” trade marks did not quality for registration under s. 9(1)(d). However, because of the evidence submitted by the 1st plaintiff’s solicitors, the Registrar decided to register the “Aqua” marks under s. 9(1)(e). 85.As regards the two “Aqua LEISURE” trade marks, all the products in respect of which the marks were registered are also swim or water-related products. They are all products to be used in aquatic leisure activities and aquatic sports. 86.As I have said, the Registrar came to the view that the two “Aqua” marks should not be registered under s. 9(1)(d) but because of the evidence of user submitted, registration was allowed under s. 9(1)(e). It was made clear in the register that the trade marks were deemed to be distinctive of the 1st plaintiff’s goods pursuant to s. 9(1)(e). No such statement appears on the register in respect of the two “Aqua LEISURE” marks. It appears that the registration of two “Aqua LEISURE” marks were allowed under s. 9(1)(d) with a disclaimer of the exclusive right to use the word “LEISURE”. That was, in my view, a fundamental flaw in the decision of the Registrar. The Registrar came to the view, correctly in my judgment, that the mark “Aqua” has a direct reference to the character or quality of the goods the subject of the applications for registration of the two “Aqua” marks and hence refused registration under s. 9(1)(d). That being so, I fail to see how the Registrar could have come to the view that the registrations of the two “Aqua LEISURE” marks should be allowed under s. 9(1)(d). The same objection that “Aqua” has a direct reference to the character or quality of the goods should also been applicable to the registration of the two “Aqua LEISURE” marks. 87.It seems to me to be plain that the word “aqua” in the “Aqua” marks and the “Aqua LEISURE” marks is clearly descriptive and can be used to signify or call up in the minds of those who read it a quality or character of the goods in respect of which it is registered namely, aquatic or water-related products. In my judgment the word “aqua” has a direct reference to the character or quality of such goods. 88.The fact that the word “aqua” is a noun and not an adjective does not matter. It is no answer to say that the marks consists of the word “aqua” and not the word “aquatic”. It seems to me that “aquatic” is the adjective for “aqua” and not for “water” as Mr. Garland submitted. Mr. Garland relied on the dictionary entry for “aquatic” in the New Oxford Dictionary of English where it is defined as :
I am unable to accept that this dictionary entry supports the view that “aquatic” is the adjective of “water”. It is simply described as an adjective. The meaning of the word is “of or relating to water”. It seems to me that the noun is “aqua” and the adjective is “aquatic”. 89.In the Matter of a Trade Mark of Keystone Knitting Mills Ltd. [1928] 45 RPC 421 it was held that the word “Charm” registered in Class 38 in respect of ‘hosiery being wearing apparel’ had a direct reference to the character of the goods and the mark was expunged. It was held that in considering whether a mark has reference to the character or quality of the goods the mark must be looked at, not in its strict grammatical signification, but as it would represent itself to the public at large who are to look at it and to form an opinion as to what it connotes (at page 426). It seems to me that just as it was no answer to say that the mark was “Charm” and not in its adjectival form “Charming”, it is no answer to say here that the marks consist of “Aqua” and not “Aquatic”. 90.The defendants have established to my satisfaction that the two “Aqua” and the two “Aqua LEISURE” trade marks did not qualify for registration under s. 9(1)(d). S. 9(1)(e) 91.The defendants further contend that the “Aqua” trade marks are not distinctive and do not qualify for registration under s. 9(1)(e). 92.S. 9(2) provides that “distinctive” means :
93.Thus “distinctive” is defined as adapted, in relation to goods in respect of which the trade mark is registered or proposed to be registered, to distinguish goods with which the proprietor of the trade mark is or may be connected, in the course of trade, from goods in the case of which no such connection subsists. 94.And s. 9(3) provides that :
95.This in effect provides that there must be distinctiveness in law and also in fact. Thus regard must be had to the extent to which (a) the trade mark is inherently adapted to distinguish; and (b) by reason of the use of the trade mark or of any other circumstances, the trade mark is in fact adapted to distinguish. 96.It is well settled that both inherent adaptability to distinguish and actual adaptability to distinguish in fact must be considered and satisfied. Thus, even if a mark is found to have 100% factual distinctiveness it shall still not be registrable if it is not inherently adapted to distinguish the goods in respect of which the trade mark is sought to be registered. (Yorkshire Copper Works Ld. v. Registrar of Trade Marks [1954] 1 WLR 554); YORK Trade Mark [1984] RPC 231; Re Guangdong Foodstuffs Import and Export (Group) Corp. [2005] 1 HKLRD 520). Inherent adaptability to distinguish 97.It is necessary to consider whether the trade mark “Aqua” is inherently adapted to distinguish the 1st plaintiff’s goods from similar goods of others. 98.In determining whether a mark is inherently adapted to distinguish, the applicable test is that as stated by Lord Parker in The Registrar of Trade Marks v. W. & G. Du Cros Ltd. [1913] 30 RPC 660 at 672 namely,
99.Lord Diplock in Smith, Kline and French Laboratories v. Sterling-Winthrop Group Ltd. [1976] RPC 511 said at 538 to 539 that :
100.The Lord Parker test has also been applied by the Court of Appeal in Re Guangdong Foodstuffs. 101.It is clear from the authorities that this is the same test when one considers geographical names, laudatory epithets or descriptive words. (Yorkshire Copper Works Ltd. at 557; COLORCOAT Trade Mark [1990] RPC 511 at 517). 102.In Yorkshire Copper Works, Lord Simonds in referring to ‘inherent adaptability’ said at 557 :
103.Lord Simonds also said at 557 :
Although Lord Simonds was talking of a geographical name in that case, I have no doubt that the same considerations apply to descriptive marks namely, is it such a mark as would never occur to others to use in respect of their similar goods? 104.And in COLORCOAT, Jacob LJ (as he now is) in applying the Lord Parker test said at 516 that :
And at 517 he said that even one genuine example of descriptive use must be a conclusive answer that other honest traders may want to use the term. 105.Ultimately, the question is whether it is right or fair that a particular trader be given a monopoly over the use of the relevant word or mark in question. 106.In considering whether other traders are likely to use the mark in referring to their goods, evidence of the trade both before and after the application is relevant (Electrix Ld’s Application for Trade Marks [1958] RPC 176 at 190). 107.Mr. Garland rightly submitted that there are degrees of inherent distinctiveness and of distinctiveness in fact. This is supported by the words in s. 9(3) that the tribunal may have regard “to the extent to which” the mark is inherently adapted to distinguish and by reason of the use of the trade mark, the trade mark is in fact adapted to distinguish. This is demonstrated by the passage referred to in the decision in NV Sumatra Tobacco Trading where the Acting Registrar said at 655:
108.In Yorkshire Copper Works at 561 Lord Asquith in referring to the equivalent provisions in the Trade Marks Act 1938 said :
109.In his written skeleton final submissions, Mr. Garland submitted that the test was that one trader ought not to be allowed to obtain by registration a monopoly to use words for his products which other traders are likely, without any improper motive, to desire to use as an honest description of their own similar products. In his oral submissions, however, he went further and expanded on this and said that where other traders also wanted to use the word in a promotional way, then the monopoly should not be granted. 110.In his written skeleton final submissions Mr. Garland also submitted that in determining whether the word is one that other traders are likely, without improper motive, to desire to use as an honest description of their own similar products, the tribunal has to have regard to whether the word is or would be ordinarily, commonly, normally, naturally, habitually or customarily used by other traders to describe similar goods. In his oral submissions, Mr. Garland also expanded on this by submitting that an applicant cannot register a mark which might be ordinarily and honestly used by others in a descriptive or promotional way in respect to those particular goods. 111.I see no reason why it has to be restricted to use as a description of similar goods. It is not only descriptive use that has to be considered. The classic test of Lord Parker is not so restrictive. It is clear that the applicable test is whether other traders are likely, in the ordinary course of their business and without improper motive, to desire to use the same mark, or some mark nearly resembling it, upon or in connection with their own goods (emphasis added). This makes it clear that the test embraces different kinds of use by other traders including use as a trade mark or as a description and it is not restricted to merely use as a description. This is supported by authority. 112.In Clark Equipment Co v Registrar of Trade Marks (1964) 111 CLR 511 Kitto J in the High Court of Australia after referring to the Lord Parker test said at 514 :
This would undoubtedly include trade mark use. 113.In W and G the Court was concerned with the registration of the initials W and G joined by the symbol “&” for motor vehicles. Lord Parker after setting out the test at 672 dealing with the initials in that case said :
This is the same consideration whether the mark is a geographical name, laudatory epithet, descriptive word or initials. 114.Also, in A. Bailey and Co. Ltd v. Clark, Son and Morland [1938] AC 557 where it was held that the registration of the mark “Glastonburys” for slippers was not adapted to distinguish, Lord Maugham gave the following example of possible use by a trader of slippers in Glastonbury at 566 :
There was no restriction to use as a description. Lord Maugham was clearly talking about use as a trade mark. 115.It is not only trade mark use or descriptive use that may be considered but also use generally, in publicity and promotional or advertising material or the name of a business that must be taken into account. If other traders would wish to use the mark in such a way then it is unfair to grant a monopoly for the mark. 116.In “MADAME” Trade Mark [1966] RPC 541, before Mr. Tookey QC, at 545 he said :
117.In BUDGET Service Mark [1991] RPC 9 Jacob LJ (as he now is) referring to the decision of Miss Douglas, acting for the Registrar, said at 14 :
118.In Electrix Ld’s Application for Trade Marks [1958] RPC 176 at 193 Jenkins LJ giving the judgment of the Court said :
Such possible uses were taken into account and this included trade mark use and not just descriptive use. 119.Mr. Garland relied on Re Joseph Crosfield& Son’s Ld.’s Application (1909) 26 RPC 837 and what Fletcher Moulton LJ said at 859 :
120.However, it seems to me that the descriptive use of the words was one possible use considered by the Court. This did not preclude the Court from considering the relevance of other uses, including trade mark use and use in promotional or publicity material by other traders so as to disentitle the applicant from registration of the trade mark. 121.Mr. Garland relied heavily on Re J & P Coats Ld’s Application (1936) 53 RPC 355. This was in respect of the registration of the word “Sheen” for “machine twist being sewing cotton”. It was held that the word “Sheen” was not the ordinary or natural word used in the trade, not a word incapable of losing its primary meaning and that its registration would not embarrass a trader who used it legitimately. 122.That case however is distinguishable. It provides no assistance to the 1st plaintiff. There was considerable evidence of the trade in that case which led the Court to come to the view that the word “Sheen” was not a word simply descriptive of the quality of the goods. There was considerable evidence that the word “Sheen” was not the ordinary and natural word which would be used in the trade to describe sewing cotton. The evidence in that case showed that “Sheen” and “Super Sheen” have in the sewing cotton trade generally become well known as denoting exclusively machine twist of the applicant’s merchandise and as distinguishing their machine twist from that of any other cotton manufacturer or merchant. The Court in that case also considered (at 375) that on the evidence which was overwhelming it was not the ordinary or natural word which in the trade would be used, including use as a trade mark. 123.As Jacob LJ (as he now is) said in BUDGET at 15 :
124.That is also the difference between Sheen and this case. Here the evidence is overwhelming that other traders did want to and have used the word “aqua” in relation to goods of the same description. The evidence is referred to in Schedule A to Mr. Yan’s closing skeleton submissions. 125.It is plain that possible defences to infringement under s. 34 such as that the use is merely a bona fide description of the character or quality of a person’s goods should not be taken into account when considering registration of a trade mark. The reason for this is that the privilege of a monopoly should not be conferred where it might require honest men to look for a defence (COLORCOAT at 517). 126.The submission of Mr. Garland to the effect that a mark is not inherently adapted to distinguish only if other traders would wish to use the mark as an honest description of their own similar products or for promotional material but not if other traders would desire to use the mark as a trade mark is in my judgment misconceived. This is not what Lord Parker said. The classic test of Lord Parker has been applied in the later authorities as well as by the Court of Appeal in Hong Kong in Re Guangdong Food Stuffs. In my judgment that is the correct and applicable test and not the test as submitted by Mr. Garland. 127.In considering the test as to whether other traders are likely, in the ordinary course of their business and without improper motive, to desire to use the word “aqua” upon or in connection with their goods, the evidence presented by the defendants show that it is clear that other traders would wish to do so. The 1998 Inflatable Items catalogue of Shanghai Oriental Plastic Products Co. Ltd. (“Shanghai Oriental”) show that “AQUA” has been used for an inflatable ball, “Aqua Animals” for animal toys to be played in water, “Aqua Boat” and “Aqua Fun Boat” for inflatable boats. Intex has also in their 1995 catalogue used “Aqua Vision Mask” for its swim masks. These clearly show that at the time of the application of the trade marks other traders in Hong Kong were likely, in the ordinary course of their business and without improper motive, to desire to use the word “Aqua” upon or in connection with their goods. It is use upon or in connection with the goods that matters. It is no answer to say that the use has been trade mark use and not as a description of the goods. 128.There are also other catalogues by other traders after the date of the application for registration of the trade marks which show that other traders have used the word “aqua” upon or in connection with their goods in the ordinary course of their business without improper motive. This can be found in the Grace Best (International) Industrial Co. Ltd. (“Grace Best”) catalogue where there is the use of the “best aqua” swimming goggles and the 1999 catalogue of Royal Beach where “Aqua Park” is used upon or in connection with pools and inflatables. 129.There are also many examples of other traders using “Aqua” upon or in connection with inflatable swimming pools, floating playthings as set out in Schedule A to the written final submissions of the defendants. It matters not that the evidence of this was after the date of the application. It serves to illustrate the point that as at the date of the application other traders would wish to use the word “Aqua” upon or in connection with their goods without improper motive. 130.There is also an abundance of evidence of the use of the word “aqua” in relation to water-related products and swim products in foreign countries as detailed in Schedule A to the written final submissions of the defendants. All this, together with the fact that in the said catalogues of Intex, Royal Beach and Shanghai Oriental referred to above those traders did use the word “aqua” in connection with swim or water-related products, does demonstrate, and I so find, that in 1998 traders in Hong Kong were likely to want to use in the course of their business the word “aqua” in connection with or upon the products in respect of which the registrations were sought. 131.The evidence also shows that the 1st plaintiff was a licensee of Aquatoys Inc. who marketed the “AquaDisc” and “AquaSkimmer” products. Far from complaining about the use of the word “aqua” by Aquatoys Inc., the 1st plaintiff took out a licence to produce these two products under a license agreement with Aquatoys Inc. This provides cogent evidence that honest traders, like Aquatoy Inc., desired to use the word “aqua” for floating playthings which are goods covered by the registrations. 132.It seems to me that it would not be right or fair for the 1st plaintiff to have a monopoly over the word “aqua” under the “Aqua” and “Aqua LEISURE” trade marks in respect of the goods for which they were registered. 133.In my judgment the word “aqua” is a very descriptive word and commonly regarded and understood in Hong Kong as meaning water. It is a natural and ordinary word in relation to the goods covered by the registrations that other traders would wish to use. All the goods covered by the registrations are water-related goods to be used in aquatic leisure activities and aquatic sports. 134.It is pertinent to observe that the 1st plaintiff has itself described the products it deals in as “aquatic leisure” products in its statement of claim dated 2 July 1999 filed with the Donguan Technical Supervision Bureau in the Mainland. 135.I have no hesitation in finding that in 1998 other traders would have wished to legitimately use the word in relation to or in connection with the same or similar goods. Such use would have been use either as a description of the goods or as trade mark use or use as promotional material. All this is use in relation to or in connection with the goods. 136.That being so, it seems to me that the word “aqua” was not inherently adapted to distinguish and the requirement of (a) under s. 9(3) was not satisfied. Factual distinctiveness 137.The1st plaintiff’s case is that by the time of the application for registrations of the mark the 1st plaintiff had 100% distinctiveness in fact. It was submitted that there was no other trader which had in Hong Kong used the word “aqua” on the specified goods other than the 1st plaintiff so that 100% distinctiveness in fact had been established. 138.I am unable to accept this. There was evidence that Intex had in its 1995 and 1996 catalogues offered for sale a product called “Aqua Vision” in connection with swim masks. Shanghai Oriental also in their 1998 catalogue offered for sale products called “Aqua”, “Aqua Fun”, “Aqua Animals”, “Aqua Boat” and “Aqua Fun Boat”. These were offered for sale in their catalogues before the date of the application of the registered trade marks. The defendant did not put in evidence of the quantities, of these products sold in Hong Kong before the date of the application. However, it seems to me that as they were offered for sale in the catalogues there has been some use made of the word “aqua” by such other traders although it is not clear how extensive such use was in Hong Kong. Even though factual distinctiveness has been shown, I am not persuaded that there has been 100% factual distinctiveness by the 1st plaintiff at the time of the application. 139.In support of its applications for registrations, the 1st plaintiff relied on the statutory declaration of Douglas Stephen Clark to establish evidence of the 1st plaintiff’s use of the mark “Aqua”. In the letter dated 29 June 1999 the Registrar was satisfied that the “Aqua” trade marks were deemed to be distinctive of the 1st plaintiff’s goods on the basis of the evidence of user submitted. Mr. Yan, however, submitted that the evidence contained in the said statutory declaration was insufficient to establish factual distinctiveness of the mark “Aqua”. 140.Para. 7 of the declaration showed that since 1992 the 1st plaintiff sourced through or from Hong Kong more than 50 m. units of their products all bearing the trade mark “Aqua” with total sales in excess of US$150 m. Berenson, however, confirmed in evidence that this quantity included all products not only bearing the mark “Aqua” alone but “Aqua” in combination with other words. Also, this included all products exported. The fact that this quantity was sourced through or from Hong Kong does not mean that this quantity was sold in Hong Kong. Domestic sales in Hong Kong were much less. According to Sue Chow, the total domestic sales in Hong Kong between 1996 and 1998 was about US$100,000 per year but it is not clear how much of this was for products under the mark “Aqua” alone and how much was for products under the mark “Aqua” in combination with other words and for products under the 1st plaintiff’s “Dolfino” mark. On the documentary evidence exhibited to the affirmations of Pearl Lam there were from 1992 to 1998 domestic sales of 143,775 pieces or an average of 20,000 pieces each year. Sales were made domestically to Toys ‘R’ Us and Seibu. It does not appear that there were substantial domestic sales at the time of the application. 141.Mr. Yan made the point that the only trade fair in Hong Kong where products bearing the “Aqua” trade marks could have been exhibited was in January 1998, the Hong Kong Toys and Games Fair. This was because Berenson said that before November 1998 the only exhibitions the plaintiffs had participated in were in January 1985 and 1998. However, in 1985 the “Aqua” trade marks were not in use so the only exhibition where the “Aqua” trade marks were used on products was in January 1998. This was, however, as Mr. Yan submitted, limited exposure in a trade fair in Hong Kong. 142.Although there was evidence of domestic sales in Hong Kong of products bearing the mark “Aqua” it does not appear that such sales were substantial. In the circumstances, the degree of factual distinctiveness was in my view not high. 143.In any event even if there was 100% factual distinctiveness that in itself would not be sufficient to render the word “distinctive” to qualify for registration under s. 9(1)(e) as the word “aqua” was not inherently adapted to distinguish. Foreign registrations 144.Evidence has been given of the 1st plaintiff’s trade mark registrations in foreign countries. 145.In “NEEDLE-POINT” Trade Mark [1973] RPC 113 it was held that the fact that the applicants had succeeded in registering their mark in a foreign country had little or no bearing on whether the mark was capable of distinguishing the goods of the applicants in the United Kingdom. 146.I do not know what material was provided to the foreign registries in support of the foreign registrations. I doubt that the vast amount of material placed before me was available to them. 147.It seems to me that the foreign registrations have little or no bearing in the absence of written decisions showing the grounds for the decision and the reasoning applied in arriving at them. (Unilever N. V. Application, unreported decision of Mr. Kripas, 15 April 2002; L’Oreal Application, unreported decision of Miss Quek, 19 April 2004) 148.In my judgment the “Aqua” and “Aqua LEISURE” trade marks should not have been registered as trade marks without a suitable disclaimer to the use of the word “aqua”. The representation of the marks include the line under the word “Aqua” in a stylized form and it may well be that the particular representation has some use to the 1st plaintiff. In the United States Patent and Trade Mark Office, the 1st plaintiff’s mark was said to be of the word “Aqua” :
I am of the view that the word “Aqua” ought to be disclaimed. The defendants have satisfied me that the registration of the “Aqua” trade marks ought to be varied to the extent that there should be a disclaimer to the word “Aqua”. The same considerations should apply to the “Aqua LEISURE” marks. In my judgment the defendants succeed to this extent on their counterclaim. 149.As regards issue 2, I find that each registration is an entry entered in the register without sufficient cause in that each of the registered trade marks was not when registered (and continues not to be) a trade mark registrable under s. 9 in that :
In the circumstances as regards Issue 3, I am satisfied that the 1st plaintiff’s trade mark registrations ought to be varied to the extent that there should be a disclaimer to the word “Aqua”. 150.In view of my decision on Issues 2 and 3, Issue 1 as regards whether the “Aqua” and “Aqua LEISURE” trade marks have been infringed does not arise. Passing Off 151.The applicable principles are not disputed. Lord Diplock in Erven Warnink Besloten Vennootschap and another v. J. Townend & Sons (Hull) Ltd. And another [1979] A.C. 731 said at 742 that there are five characteristics which must be present to create a valid cause of action in passing off. These are :
152.In Reckitt & Colman Products Ltd. v. Borden Inc and others [1990] 1 WLR 491 Lord Oliver said at 499 :
Lord Oliver at 499 summarized the elements to be proved in order to succeed in a claim for passing off as the following three elements :
The essence of the tort is misrepresentation. 153.The plaintiffs’ case as pleaded at para. 21 of the re-re-re-amended statement of claim is that the 6th defendant has passed off the products and business not being the products or business of the plaintiffs as and for such products or business by :
Particulars of the acts of passing off were provided at para. 23of the re-re-re-amended statement of claim. Instruments of deception 154.It is also passing off for a trader to put into circulation goods which are inherently likely to deceive ultimate purchasers or consumers even though they are sold to middlemen who are not deceived. The tort of passing off is complete when the defendant parts with possession of the deceptive goods even though the damage may not occur until later,if at all (Wadlow’s The Law of Passing Off 3rd Edn. para. 5-103). When deceptive goods are exported, liability can arise under the doctrine of instruments of deception. The tort of passing off is complete when deceptive goods are exported or disposed of in Hong Kong even though it may be destined for a foreign market. This is not disputed. However, it is necessary to prove that the goods are such as would deceive ultimate purchasers in that market. The claimant must prove that his mark is distinctive in that market and that the defendant’s conduct is calculated to deceive there (Wadlow para. 5-114). 155.Where a trader adopts a descriptive word or a word in common use for his trade name or mark, he must accept that some risk of confusion is inevitable. The Court will accept comparatively small differences as sufficient to avoid confusion (Office Cleaning Services, Ld. v. Westminster Window and General Cleaners, Ld. [1946] RPC 39; Land Power International Holdings Ltd. & Ors v. Inter-Land Property (HK) Ltd. [1995] 2 HKC 146). 156.Lord Simonds said in Office Cleaning at 43 :
Reputation and goodwill in Hong Kong 157.The plaintiffs have to establish a reputation and goodwill in Hong Kong to found its cause of action in passing off against the 6th defendant. 158.The major part of the total sales and supply of “Aqua” swim products from Hong Kong have been for export to North America. Summaries of the total sales made by the 2nd plaintiff of “Aqua” swim products have been included in the trial bundles. These have not been challenged. As summarized by Mr. Garland in his written skeleton final submissions (at para. 96) they show sales to the following countries from 1992 to 1998 :
These show substantial sales to the USA with limited sales of 143,775 units of “Aqua” swim products in Hong Kong for the years 1992 to 1998. 159.According to the evidence of Hoiriis, there were also sales in 1997 and 1998 to the following additional countries : Australia, Denmark, France,Holland, Israel, Kuwaitand Taiwan. 160.Berenson’s evidence is that since 1992 the plaintiffs have sourced through or from Hong Kong more that 50 m units of the plaintiffs’ products with the trade mark “Aqua” with total sales amounting to greater than US$200 m. The majority of the sales were undoubtedly to North America. 161.Sue Chow said that between 1996 and 1998 direct sales to countries excluding USA, Canada and South America have exceeded HK$24 m. Domestic sales for the same period were around US$100,000 per year. 162.Mr. Yan submitted that the evidence was insufficient to establish goodwill or at least strong goodwill in Hong Kong in the “Aqua” or “Aqua LEISURE” trade marks. 163.It seems to me that the fact that 50 m units were sourced through or from Hong Kong does not mean that this quantity of products reached the attention of the consuming public in Hong Kong. The evidence of Sue Chow was that domestic sales in Hong Kong between 1996 and 1998 was about US$100,000 per year. This presumably included products sold both under the 1st plaintiff’s “Aqua” trade marks and “Dolfino” trade marks. In terms of quantity, 143,775 pieces were sold domestically from 1992 to 1998 or 20,000 pieces per year on average. There is also the evidence in the statutory declaration of Douglas Clark that there have been sales in Toys ‘R’ Us and Seibu so it seems that the domestic sales took place there. 164.The plaintiffs also rely on the evidence of Berenson that the plaintiffs have promoted and offered their products for sale in Hong Kong both at trade fairs and at the 2nd plaintiff’s showroom. However, those attending the trade fairs and the 2nd plaintiff’s showrooms would have been traders in the field and it is unlikely that they would have been the consuming public in Hong Kong. 165.Raymond Ferretti, Kathryn Re and Terrence Doyle, all former buyers for retail chain stores in the USA, gave evidence that the 1st plaintiff was commonly referred to as “Aqua” and that in their experience the 1st plaintiff was the only maker of swim products who has used the word “Aqua” whether alone or in conjunction with other words. They were of the view that swim products sold under those marks designated the products of the 1st plaintiff. Their evidence undoubtedly supports the fact the plaintiffs had very substantial reputation and goodwill but this would be for their markets in the USA. Their evidence does not, in my view, support a very substantial and extensive reputation and goodwill of the plaintiffs in respect of the “Aqua” products in Hong Kong. 166.I am satisfied, however, that the plaintiffs have established sufficient reputation and goodwill in Hong Kong in the mark “Aqua” to found the action in passing off. However, such reputation and goodwill in Hong Kong was not substantial but it is sufficient to found the action. This element in the tort has been established to my satisfaction. Reputation and goodwill in Europe 167.Antoine Mettens, De Vries and Frank Tiessen gave evidence to the effect that the plaintiffs did not have a significant presence in Europe in 1998 and that “Aqua Leisure” was a minor brand in Europe in 1998. I observe that this part of their evidence was not challenged. 168.Mr. Yan also submitted that the plaintiffs’ own evidence supported the view that “Aqua Leisure” was not an established brand in Europe in 1998. There is some force in this submission. 169.The invoices for sales to Germany indicated that only 159,538 units of “Aqua” swim products were sold to Germany from 1993 to 1996. However, it is possible that further sales were made to Germany to a company called Globus as Hoiriis said that this was either an Austrian or German company. There were sales of about 10,000 units in 1997 and 54,000 units in 1998 to Globus. 170.As regards Denmark, there is evidence from Hoiriis that sales were to a company called Top Toy in Denmark with 19,536 units in 1997 and 5,364 units in 1998. These are not substantial sales. 171.As regards the Czech Republic, there is no evidence of any sales or promotional activities in respect of the plaintiffs’ products there. No evidence to support any goodwill or reputation there has been adduced and in my view the plaintiffs have failed to show a reputation and goodwill in the Czech Republic. 172.As regards Italy, there were sales of 99,090 units to Italy from 1992 to 1994 and 3,558 units in 1996. Hoiiris also gave evidence that he believed that there were sales to a company called Genovese which sounded Italian to him but he could not say definitely whether these were sales to an Italian company. For 1997 there were sales of 660 units to this company. Also, there were sales to Toys ‘R’ Us in Italy of 864 pieces in 1997 and 7,170 pieces in 1998. These were not substantial quantities. 173.As regards Belgium, the summary of invoices show that the 2nd plaintiff sold 339,810 units from 1992 to 1996. 174.As regards Spain, the summary of invoices indicate that 473,232 units of Aqua swim products were sold in Spain in the years 1992 to 1993 and 1996 to 1998. 175.As regards Holland, there is no evidence of any sales or promotional activities regarding any of the plaintiffs’ products. 176.It is significant that Berenson himself acknowledged in evidence that as at the date of the Nuremberg fair in 1998, the plaintiffs’ business was rather limited in Europe. 177.Mr. Yan also submitted that the fact that there was evidence of export to European countries does not mean that the plaintiffs have acquired reputation and goodwill in those countries as there is no evidence that the goods were sold to the public there. However, I agree with Mr. Garland that this is a matter that can be inferred. It can reasonably be inferred that sales have taken place in the countries where the plaintiffs have exported their products and I so infer. 178.Be that as it may, the plaintiffs have established that they have a reputation and goodwill only in the following countries in Europe :Germany, Denmark,Italy, Belgium andSpain. However, such reputation and goodwill was not a substantial one but, in my view, it was sufficient to found the action. Reputation and goodwill in other countries 179.As regards Australia, there was no evidence of any sales or promotional activities in Australia. The plaintiffs have failed to establish goodwill and reputation in Australia. 180.As regards South Africa, there was evidence of sales of 159,512 units of Aqua swim products from 1992 to 1995. This was not substantial. 181.As regards Dubai, the evidence shows that there were sales of 17,700 units from 1992 to 1996. This was also not substantial. 182.The evidence shows also that in South Africa and Dubai, the plaintiffs did not have a substantial reputation and goodwill in 1998 but in my view there was sufficient reputation and goodwill to found the action. Was there misrepresentation? 183.The essence of the tort is misrepresentation. It is necessary to consider if there was any misrepresentation by the 6th defendant as to constitute passing off. 184.The 6th defendant was incorporated in Hong Kong on 13 March 1998 under the name Aqua Splash Limited. There is no dispute that De Vries was the ultimate controller of the company. The 2nd defendant and Lin were directors and shareholders. 185.There is no dispute that the 6th defendant distributed its catalogue Exh. P9 featuring Aqua Splash swim products at HKITGS in October 1998 where it had a sales booth. 186.There is also no dispute that sometime in 1998 and end June 1999, the 6th defendant sold Aqua Splash swim products to the value of over HK$26 m. of which about half were to the 1st defendant. 187.The question to consider is whether there has been any misrepresentation by the 6th defendant. 188.It is not necessary to show an intention to deceive as part of the cause of action. However, the plaintiffs rely on an intention to deceive on the part of the defendants at para. 25 of the re-re-re-amended statement of claim where it is pleaded that :
189.Thus by such plea, in support of their allegation of an intention to deceive on the part of the defendants, the plaintiffs rely on the fact that :
190.The plaintiffs rely heavily on the fact that De Vries was actuated by fraud when he chose the name “Aqua Splash” for his company. 191.De Vries gave evidence that in mid to late 1990s he decided to launch a range of inflatable swimming toys and related accessories. The dominant market leader at that time was Intex. The 1st defendant began selling inflatable swimming toys and related accessories in the early 1980s. It bought primarily from Intex. There was no formal distribution arrangement. The 1st defendant onsold Intex products to its (the 1st defendant’s) European customers. After the establishment of the 2nd defendant, the 1st defendant’s purchases of Intex products was carried out through the 2nd defendant who onsold the goods to the 1st defendant. 192.By 1996 it became apparent to De Vries that Intex was expanding its sales network and increasingly selling direct to the 1st defendant’s European customers. Because of this it became increasingly difficult to realize a profit from onselling Intex products into the European market. The 1st defendant’s last purchase of Intex products was made in or about October 1997. De Vries decided to explore other alternatives and decided to launch an exclusive range of inflatable products. 193.For that reason, he was interested in identifying potential suppliers when he attended the Nuremberg Toy Fair in January 1998. This is the world’s largest trade exhibition in the toy industry. He said in evidence that there were approximately 10 to 15 manufacturers at the fair. He visited the booths of each of these to identify potential manufacturers for a new line of inflatables. 194.I accept and believe this part of De Vries evidence and find that he was truthful and credible on these matters. 195.De Vries also visited the 1st plaintiff’s booth. There is no dispute that he must have met and discussed matters with Berenson although Berenson in his witness statement thought that he had discussed matters with Hartwig Spreuwers. 196.There is a dispute of fact as to what transpired between De Vries and Berenson at the Nuremberg Toy Fair in January 1998. 197.De Vries said that the representative that he spoke to, which must have been Berenson, gave him the impression that the 1st plaintiff was a manufacturer of inflatables. As a result of this, he was interested to explore whether the 1st plaintiff might be a suitable manufacturer and supplier for the 1st defendant. He said that they discussed in general terms the possibility of the 1st plaintiff manufacturing a range of inflatables. He was given the 1st plaintiff’s catalogue and showed a price list although he did not remember whether he was given a price list to take away. He said that after he visited the 1st plaintiff’s booth he asked other Impag representatives including Hartwig Spreuwers, Marco Zeegers, Rudd Veldkamp and Radka Houstova to visit the booths of the companies that he had visited and to give him their opinion as to the marketability of the manufacturers’ product lines.He said that H CoerdH 198.De Vries was adamant that he did not enter into any deal with the 1st plaintiff’s representative during the fair. He learned subsequently at the fair that the 1st plaintiff was not itself a manufacturer of inflatables but a distributor. He denied that in his discussions with Berenson he told him that he wanted to be the 1st plaintiff’s distributor in Germany as well. 199.Berenson said that he had an initial discussion with a representative of the 1st defendant who must have been De Vries. He gave a catalogue and confidential price lists to him. He said that during the fair there were three visits by various representatives of the 1st defendant. He said that he gave them everything they would need to know to sell his product range in Europe. He basically went into detail as to how they approached customers, how he sold the products, their best prices which was confidential and also what they would need to do to be successful. As a result of the discussions he had, Berenson was convinced that a deal had been reached with the 1st defendant for the 1st defendant to be a distributor in Europe for the 1st plaintiff. As it had been indicated to him that the 1st defendant wanted to distribute in Germany as well, the 1st plaintiff also dismissed their German distributor during the time of the fair. He said that, however, when he went over to the 1st defendant’s booth on the final day of the fair to shake on the deal the 1st defendant’s representatives indicated that they were not sure whether they were still interested in serving as the 1st plaintiff’s distributor in Europe. Berenson said that their reaction was a total turnaround from what he thought was a commitment. Thereafter he never received any communication from the 1st defendant. 200.On this dispute of fact between Berenson and De Vries, I prefer the evidence of Berenson to that of De Vries. I accept Berenson’s evidence on these matters and reject De Vries evidence on this. I find that De Vries did give Berenson the impression that the 1stdefendant wanted to be the European distributor for the 1st plaintiff in relation to inflatables and swim products. I also find that De Vries obtained a confidential price list and the 1st plaintiff’s catalogue and other information about the way the plaintiffs sold in Europe from Berenson. 201.However, I am not satisfied that there was any intention to deceive on the part of De Vries. He wanted to launch a new line of inflatables and he wanted to get as much information as possible from a competitor. 202.The intention which must be proved is an intention to deceive, not any other intention, such as an intention to take advantage of the market developed by a competitor’s advertising campaign (Cadbury-Schweppes Pty. Ltd v. The Pub Squash Co. Ltd. [1981] RPC 429 at 494). De Vries was simply taking advantage of the market developed by the plaintiff by getting as much information as possible from Berenson. 203.De Vries gave evidence, which I accept, that one of booths he visited during the fair was the booth of High Crown International Corporation (“High Crown”). This is a Taiwanese company manufacturing inflatables in the Mainland. He talked to Ian Kao of High Crown. As a result of discussions with him he became confident that High Crown would be suitable to manufacture inflatables for him. He was invited by Ian Kao to visit him in Taiwan. 204.De Vries said that after the fair he visited his second home in Portugal where he used to spend time thinking about the progress of his company’s business and considering new ideas. At that time he decided to name the new line of inflatables “Aqua Splash”. This was inspired by the chain of Aqua Splash water parks in Portugal and he considered this to be an appropriate name for his line of inflatables. Hence his choice of name “Aqua Splash”. I accept his evidence on this and find his explanation credible. I believe him. I find that his choice of name was not related to the 1st plaintiff’s trade mark and name. The 6th defendant was thus incorporated in March 1998. 205.I find that De Vries was truthful and credible when giving evidence on these matters. I am satisfied that he was not actuated by fraud when he chose the name “Aqua Splash”. I am unable to accept that De Vries wanted to copy the name and the products of the plaintiffs. I am satisfied that De Vries did not intend to deceive. The words “Aqua Splash” are also in my view very descriptive of the products in the 6th defendant’s range of goods and it was apt to describe the products and business of the 6th defendant. Other traders have also used the name “Aqua Splash” upon or in connection with similar goods and water related goods. There was evidence of the use of this on divers’ masks and water parks in Italy, Switzerland, Greece and France, and on children’s splash pools. 206.De Vries also gave evidence, which I accept, that he went to Taiwan in March 1998 together with Marco Zeegers of the 1st defendant for further meetings with Kao. They selected products from the existing range of products manufactured by High Crown. The 1st defendant also requested High Crown to produce moulds for a small number of items not previously produced by High Crown. 207.During this visit De Vries also met Patrick Galante of MGM Design Creation Textiles (“MGM”) a French design company to discuss surface designs for products in the Aqua Splash range. He gave Galante a broad description of concepts and images he was hoping to project through the Aqua Splash range and suggested that the range should be based on primary colours such as red, yellow and blue. Galante agreed to prepare a selection of new designs. 208.De Vries also said that in April 1998 Marco Zeegers met with MGM in France and reviewed the MGM designs. These were brought to Hong Kong in late April 1998 when they met Kao and settled on the final physical and printed designs of the full Aqua Splash range. 209.The documentary evidence supports De Vries that the 6th defendant paid MGM about US $40,000 for the designs. 210.De Vries also said that High Crown produced the sample products in late May or early June 1998. Thereafter De Vries arranged for Kral Image Centre a studio in the Netherlands to take photographs of the sample products. After the photographs were taken, these were sent to the 5th defendant. She then arranged for Talent Design Company(“Talent Design”) to design the layout of the Aqua Splash catalogue incorporating the photographs. The catalogue is Exh. P9. 211.Talent Design was also instructed to design a logo for the “Aqua Splash” range. 212.There is a dispute of fact between De Vries and Lin as to what instructions were given to Talent Design. 213.De Vries said that he gave general instructions to Talent Design regarding the design of the logo. De Vries accepted in evidence that the 1st plaintiff’s catalogue together with catalogues of other traders were provided to Talent Design although he said that this was given by Lin to Talent Design. He accepted that he did provide many catalogues, including the 1st plaintiff’s, to Lin and it was his evidence that she provided the same to Talent Design. Lin’s evidence was that the catalogues had been supplied to Talent Design as Talent Design had not previously had experience of designing catalogues for companies that traded in inflatables. She said that De Vries mentioned that the logo should have some association with water. Talent Design prepared a selection of six logos from which De Vries selected one. I accept this part of her evidence. The logo that was eventually produced was the one used in the catalogue Exh. P9. De Vries also said that he wanted to use revolutionary colours of yellow and blue. This was in contrast to Intex and the 1st plaintiff which was on blue or teal on a white background. This was also the logo used on the packaging of the products of the 6th defendant. 214.Lin in her supplemental statement said that De Vries told Law Ho Ming of Talent Design to produce a catalogue similar to the 1st plaintiff’s catalogue and that he also said that he wanted the “Aqua Splash” logo to be similar to the 1st plaintiff’s logo. She confirmed this in evidence. This was denied by De Vries. 215.On this dispute of fact, I prefer the evidence of De Vries to that of Lin. Lin’s evidence on this only came in her supplemental witness statement. It was never in her original witness statement when she was still a defendant. By the time she made her supplemental statement the plaintiffs and Lin had already entered into a settlement agreement whereby they settled these proceedings on certain conditions. One such condition was that Lin had to give evidence both written and oral regarding all matters in her knowledge which assists the plaintiffs’ claims in the action. She was under an obligation to give evidence to assist the plaintiffs and her evidence must be viewed with care with that in mind. 216.Lin was also under an obligation to procure an authorized representative of Talent Design to give evidence regarding the full circumstances of the design of the 6th defendant’s catalogues and the instructions they received. She fulfilled that obligation by making Law Ho Ming available to the plaintiffs. The plaintiffs served a witness statement of Law Ho Ming. However, for reasons not explained, they failed to call him as a witness at the trial. Law must have been a crucial witness on this dispute of fact yet the plaintiffs failed to call him even though a witness statement had been served. Law’s witness statement is, of course, not evidence at the trial. I accept Mr. Yan’s submission that an adverse inference should be drawn against the plaintiffs that if Law had been called to testify, his testimony would not have supported Lin’s evidence on this dispute of fact but would instead have supported De Vries account of this(see the observations of Le Pichon JA in Li Sau Keung v. Maxcredit Engineering Ltd & Another [2004] 1 HKC 434 at 443-444). 217.The plaintiffs rely on the use by the 6th defendant of the name “Aqua Splash” and the use of the mark “Aqua Splash” to market and sell their products. They allege that the “Aqua Splash” logo is graphically represented in a style similar to the graphic representation of the 1st plaintiff’s “Aqua” trade mark. They also allege that the 6th defendant had also offered to sell and sold some Aqua Splash swim products which were similar in design to the plaintiffs’ Aqua swim products. The plaintiffs’ case is that a substantial number of trade purchasers in Hong Kong would likely have been deceived into thinking that the Aqua Splash swim products were from the same people who made Aqua swim products i.e. the plaintiffs or otherwise in some way connected with the makers of the Aqua swim products. 218.The plaintiffs also rely on the fact that there was actual confusion among trade purchasers visiting trade fairs. The evidence of Sue Chow was that Jana Prochazkova, a trade customer of the 1st plaintiff from the Czech Republic attended the HKITGS in October 1998. She told Sue Chow that when she went to the fair she began to look for her as she thought that the plaintiffs were exhibiting at that fair. She walked around the fair and approached the “Aqua Splash” booth thinking that it was the 1st plaintiff’s booth. The 1st plaintiff in fact did not have a booth there. I observe that Prochazkova has not been asked to provide a hearsay statement. No explanation has been given as to why it was not possible to provide such a statement. I attach little weight to Sue Chow’s evidence on this. It may well be that because of the use of the word “aqua” she thought that it was the plaintiffs’ booth. However, she must have been learnt very quickly that this was not the plaintiffs’ booth as she went to look for Sue Chow later in her office. There is no evidence as to what transpired at the 6th defendant’s booth. There is no suggestion that she was misled by anyone at the booth into thinking that this was the plaintiffs’ booth or was associated with the plaintiffs. In my judgment this is in any event the type of confusion which must be tolerated by a trader who chooses to use a very descriptive word like “aqua” in his name and trade mark. 219.Ken Suchard whose evidence is by way of a hearsay statement gave evidence that he attended the February 1999 Nuremberg Toy Fair on behalf SMC Kidz-Toys in South Africa. He was asked by his associate to attend the 1st plaintiff’s booth at that fair but he was given the wrong booth number. He walked around the fair and came across a booth with the name “Aqua Splash” and assumed that because of the name “Aqua” this was the plaintiffs’ booth and approached it. He asked for Berenson or Sue Chow but was told that the booth was not the 1st plaintiff’s but Aqua Splash’s. He was told that the two companies were not the same. So it seems that it was immediately made clear to him that it was not the 1st plaintiffs’ booth. He was not misled into entering into discussions with the 6th defendant or misled into thinking that it was in some way associated with the plaintiffs. If he was confused by the use of the word “aqua”, this again is in my judgment the sort of confusion that must be tolerated by a trader who uses a very descriptive word like “aqua” in its name and trade mark. 220.The two instances of confusion relied on do not assist the plaintiffs. 221.The plaintiffs also rely on the similarity of some of the 1st plaintiff’s products and the 6th defendant’s products. This has been expanded on in the evidence of Berenson by reference to Exh. P12 which sets out the 1st plaintiff’s and the 6th defendant’s products taken from their respective catalogues. 222.The first one relied on is the similarity of the surface design in the inflatable pools at page 1 of Exh. P12. In my judgment the surface designs are not closely or substantially similar. The 6th defendant’s surface designs were designed by MGM for the 6th defendant and they are not closely or substantially similar to the 1st plaintiff’s surface designs. It has not been disputed that MGM designed these for the 6th defendant. There is no suggestion that MGM copied the surface designs from the plaintiffs’ surface designs. 223.There is also a reliance on the similarity of the lounger shown at page 2 of Exh. P12. There is in my judgment a substantial difference between the two, the difference being the hole at one end in the 1st plaintiff’s product which is absent in the 6th defendant’s product. Absent the hole this was a very common design as accepted by Berenson in evidence. 224.The evidence also shows that Intex had a similar product before 1998. Other companies also had this similar product. The fact that there was such a lounger in the 6th defendant’s range of inflatables would not lead to deception or confusion with the plaintiffs’ products. 225.As regards the goggles, masks, snorkels and fins in Exh. P12, the evidence shows that the designs of these were not unique to the plaintiffs but were common products widely available from different companies. This was accepted by Sue Chow. 226.De Vries gave evidence which I accept that the 6th defendant sourced masks and goggles from Grace Best. These were goggles and masks designed by Grace Best who sold to different customers under their own brand name and their own packaging. When De Vries visited Grace Best’s showroom in April 1998 he saw Grace Best’s products displayed in the packaging of at least ten toy companies including the 1st plaintiff. The selection of masks and swimming accessories made by De Vries and Zeegers was made from Grace Best range. 227.I am unable to accept that because the 6th defendant and the 1st plaintiff had similar items for sale which were common and widely available to other traders this would lead any one to be deceived or confused into thinking that the 6th defendant was in some way associated with the plaintiffs. 228.There was also an allegation, although not pleaded, that by using the words “Official Safety Lens” and “Polycarbonate Lens” on some of their masks the 6th defendant copied the 1st plaintiffs’ products. I am unable to accept this. Sue Chow gave evidence that the markings were required by law. I am unable to accept that such markings would lead anyone to be deceived or confused into thinking that the 6th defendant’s products were in some way associated with the plaintiffs’ products. 229.In my view there are sufficient differences between the plaintiffs’ logo, catalogue and packaging and the 6th defendant’s logo, catalogue and packing so that there would not be any likelihood of deception or confusion. The 1st plaintiff’s “Aqua” mark is a simple mark consisting of the single word Aqua represented simply with a slanting upward line underneath. Berenson seemed to be unaware that in the 1st plaintiff’s trade mark registration in the United State Patent and Trade Mark Office the mark was said to be of the word “Aqua” :
So the slanting line was said to represent a fanciful silhouette of a dolphin or finned fish. This was the visual idea intended to be conveyed namely, that of a finned fish or dolphin. 230.Conversely, the “Aqua Splash” mark is a playful mark consisting of two words “Aqua” and “Splash”; “Aqua” in blue and “Splash” in red. Although De Vries said that the red “Splash” was more prominent it seems to me that both words were probably just as prominent. Underneath the word “Aqua” are two waves and there are drops of water on the side of the word “Splash”. The idea intended to be conveyed was one of waves and water. 231.It seems to me that even taking into account the imperfect recollection of customers, there are sufficient differences between the two so as to make it unlikely to mistake the “Aqua Splash” mark with the “Aqua” mark. 232.It is not in dispute that the products are typically displayed on shelves in a shop. The evidence of De Vries and Mettens is that consumers do not focus on the brands or marks when purchasing the swim products and inflatables. This seems to be supported by the fact that there is no evidence of any advertisements placed by the 1st plaintiff targeting consumers to promote the brand names of the products. Mettens and De Vries emphasized that the consumers would pay attention to the packaging and the price of the products rather than to the brand. I accept their evidence. 233.Also, the packaging of the Aqua Splash products which were sold in Europe make it plain that the goods were distributed in the European Union by the 1st defendant, a European company in the Netherelands. The packaging of the 1stplaintiffs’ products make it plain that the products were from the 1st plaintiff with the name and address in the USA of the 1st plaintiff. I find that it is unlikely that the public or traders would be deceived or confused into thinking that the 6th defendant was in some way associated with the plaintiffs. 234.Insofar as Ken Suchard in his hearsay statement suggests that there would be confusion in South Africa, I do not place much weight on his hearsay statement. There is no evidence that the 6th defendant has sold in South Africa. In any event, the plaintiffs do not enjoy substantial reputation and goodwill in South Africa. There is unlikely in my view to be confusion or deception in South Africa. 235.The “Aqua Splash” catalogue and packaging used different colours from those used by the 1st plaintiff. The 6th defendant used yellow and blue as the colours for its catalogue and packaging. This was a revolutionary choice of colours by De Vries as he confirmed in evidence. This is also supported by the different catalogues in evidence like Intex, and the 1st plaintiff’s which had a white background. 236.I am satisfied that there are sufficient differences between the 1st plaintiffs’ catalogue and packaging and the 6th defendant’s catalogue and packaging. In my judgment there has been no misrepresentation by the 6th defendant leading or likely to lead the public or traders to believe that the goods offered by it are the goods of the plaintiffs or in some way associated with the plaintiffs. As there are sufficient differences between the 1st plaintiff’s and the 6th defendant’s logo, catalogues and packages, the plaintiffs have failed to establish that there has been passing off by the 6th defendant. 237.As regards the plaintiffs’ allegation that the 6th defendant has exported instrument of deception, the plaintiffs’ pleaded case is that these have been exported to Germany, Denmark, USA, Czech Republic, Australia, South Africa, Dubai, Italy Belgium Spain and Holland (Answer 13e of the further and better particulars of the amended statement of claim). Of these, the plaintiffs have failed to establish goodwill and reputation in the Czech Republic, Holland, Australia and hence there can be no passing off in respect of export to those countries. In any event, as I have found that there are sufficient differences between the plaintiffs’ and the 6th defendant’s catalogue and packaging, the plaintiffs have failed to establish passing off in the countries where the 6th defendant has exported Aqua Splash products. 238.I find that there was no passing off by the 6th defendant. 239.In the circumstances, Issues 7 and 8 do not arise. Conclusion 240.The plaintiffs’ claims are dismissed. Judgment is to be entered for the defendants on the plaintiffs’ claims. I also give judgment to the defendants on their counterclaim and order that each entry in the register of Trade Marks in respect of the 1st plaintiff’s “Aqua” and “Aqua LEISURE” trade marks be rectified by varying each such entry so that the 1st plaintiff be required to disclaim any right to the exclusive use of the word “aqua” as a condition of each such mark being permitted to remain on the register. I also direct that under s. 48(1)(d) notice of the rectification be served in the prescribed manner on the Registrar of Trade Marks. 241.I also make an order nisi that the costs of the action and the counterclaim be costs to the defendants.
Mr Peter Garland, SC and Ms Selina Lau, instructed by Messrs Lovells, for the 1st and 2nd Plaintiffs Mr John M. Y. Yan, SC and Mr. Philips B. F. Wong, instructed by Messrs Freshfields Bruckhaus Deringer, for the 1st to 4thdefendants |
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