Koninklijke Philips Electronics N.V. v. Orient Power Holdings Ltd and Others

HCA 945/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 945 OF 2005

____________

BETWEEN

____________

Before: Deputy High Court Judge L. Chan in Chambers

Dates of Hearing: 27-31 March 2006

Date of Decision: 11 September 2006

_____________

D E C I S I O N

_____________

1.There are two groups of summonses to be dealt with.  They are issued by the 1st to 17th defendants, save the 13th defendant.  The 13th defendant is a Mainland corporation and has not been served with the writ.  For convenience the defendants, except the 13th, 18th, 19th and 20th defendants, are called “the defendants”.

2.The first group is comprised of three summonses for disallowing some amendments made by the plaintiff under Order 20 rule 3 of the Rules of the High Court.  The three summonses were issued by different defendants.  They are, in so far as material, in identical terms.  The second group is comprised of four summonses to strike out the action under all the grounds in Order 18 rule 19 and the inherent jurisdiction of this court.  They again are in identical terms.  There are two more summons for further and better particulars of the original statement of claim.  At the suggestion of the parties, they have been adjourned sine die.

The plaintiff’s case

3.The amended statement of claim is relatively lengthy.  However, the plaintiff’s case as revealed is not very complicated.  The causes of action pleaded are: breach of contract, inducing breach of contract, misrepresentation, infringement of patents, conspiracy to cause damage to the plaintiff by unlawful means and unlawful interference with the plaintiff’s business and/or its trade, business and/or economic interests.

4.The matters pleaded in the amended statement of claim can be summarised as follows.  The plaintiff was one of the originators of the standards for compact disc (“CD”) and digital video disc (now called Digital Versatile Disc (“DVD”)).  It owned a large number of patents relating to CDs, DVDs, CD players and DVD players.  CD and DVD products were governed by international standards to ensure their compatibility when made by different manufacturers.  All CD and DVD players manufactured to such standards would inevitably fall within and subject to such patents.  Within any territory where such patents were subsisting, any manufacturer which wanted to make or deal with CD and DVD players of such standards would require a licence from the plaintiff. 

5.Seven of the patents are relevant in this action.  Two of them related to CD players, another two related to in-car CD players and the last three related to DVD players.  They have all been registered with the Hong Kong Patents Registry.  (The 18th, 19th and 20th defendants were joint proprietors of one of the DVD patents in question and are joined pursuant to section 85(2) of the Patents Ordinance, Cap. 514.)

6.The 1st defendant, “OP Holdings”, was a company listed in the Hong Kong Stock Exchange.  The 2nd to 14th defendants were subsidiaries of the 1st defendant or were companies in which the 1st defendant had a joint venture interest.  The 15th defendant, “Yeung”, was the 1st defendant’s director of administration.  He was also a member of its management board and audit committee.  He had held himself out as its chief financial officer and director of corporate affairs.  He was also the company secretary of the 2nd to 12th and 14th defendants.  The 16th defendant, “Poon”, was the chairman and chief executive officer of all the companies in the group headed by OP Holdings.  He was a director and shareholder of the 1st to 12th defendants.  The 1st defendant’s annual report for 2004 also stated that Poon was responsible for strategic planning of the group.  The 17th defendant, “Wu”, was the vice-chairman of the group and a director and shareholder, directly or indirectly, of the 1st to 12th defendants.  The annual report of the 1st defendant for 2004 stated that Wu was responsible for overall production.

7.The plaintiff pleaded in paragraph 26 of the amended statement of claim that the defendants had, at all material times, been in the business of manufacturing and/or supplying CD and/or DVD players and/or holding shares in companies with such business.  It further pleaded that its patent rights were common knowledge in the electronic industry.  The defendants were members of this industry.  They were thus aware of its patent rights.  The CD and DVD players made and/or sold by the defendants were also compatible with the international standards.  The CD and DVD players also bore the relevant CD and DVD logos indicating compatibility with such standards. 

8.Furthermore, the plaintiff had, since 16 September 1993, been in communication with Orient Power International Limited, “OP International” and some of the defendants herein.  OP International was a subsidiary of OP Holdings but was dissolved on 16 September 2000.  The plaintiff had advised OP International and the defendants involved in the communications that the plaintiff was the owner of the relevant patents.  The plaintiff also offered them licences for such patents.  OP International and the defendants involved had also indicated their willingness to obtain such licences from the plaintiff.  Draft licence agreements had been provided by the plaintiff in September 1993, September 1997 and thereafter.

9.There were also meetings between the staff of the plaintiff and the defendants, including Yeung, in which the plaintiff’s licensing policy and matters about the plaintiff’s patents were explained.  On 2 November 1998, Yeung told one Mr Beune of a Hong Kong subsidiary of the plaintiff that the OP group was willing to enter into a CD licensing agreement with the plaintiff except on an issue of reporting and payment of royalties for CD players produced in the past.  On 2 June 1999 the plaintiff’s then solicitors again advised the 1st defendant that the plaintiff owned the patents in question, and in order to avoid infringement, a licence was required for use of the technology therein.  Yeung, Poon and Wu had also been advised by the plaintiff through its subsidiaries in 1999 that the plaintiff intended to enforce its rights in the patents and to receive royalties in respect of them.  The plaintiff further pleaded that from such communications, the defendants, either directly or through OP Holdings or Yeung, Poon and Wu, who managed and controlled them, had learnt that the plaintiff wanted to enter into licence agreements to cover all the CD and DVD players manufactured by all members of the OP group and those in which OP Holdings had a joint venture interest.

10.The 5th defendant, “OP Multimedia”, then entered into three licence agreements with the plaintiff on 20 December 1999.  They were the DVD Agreement, the AC-3 Agreement and the MPEG Agreement.  The 2nd defendant, “OP Electronics”, also entered into a CD Player Agreement with the plaintiff on 3 January 2000.

11.These four agreements were intended to cover all the sales of CD and DVD players by all members of the OP group.  However, the plaintiff pleaded that OP Electronic and OP Multimedia had breached these agreements by underreporting the number of CD and DVD players sold and thus underpaid the royalties.  Hence, the plaintiff brought this action against the defendants under different causes of action.

Principles for striking out

12.In approaching the applications to strike out, I bear in mind the principles summarised in paragraphs 18/19/4 to 18/19/10 and 18/19/13 to 18/19/21 of the Hong Kong Civil Procedure 2006 and would not strike out anything unless it is a plain and obvious case for striking out.

Paragraph 29 and the companies that were bound by the four agreements

13.The plaintiff pleaded under paragraph 29 of the amended statement of claim that these four agreements were entered into on the basis that OP Multimedia and OP Electronics were the companies within the OP group that would be responsible for payment of all outstanding and ongoing royalties in respect of all CD and DVD players made or dealt with by any member of the OP group.  The plaintiff further pleaded, under the particulars of this paragraph, that it would not have entered into the four agreements had it known or had reason to believe that there was no such basis.  There were also particulars pleading that the OP group was aware of the plaintiff’s intent to enter into the four agreements on that basis and that the OP group had led the plaintiff to believe that OP Electronics and OP Multimedia were the members of OP which exclusively handled the manufacturing and sale of CD and DVD players respectively. 

14.It is necessary to consider some clauses in the agreements which are relevant to this action.  The following clauses of the DVD Agreement are relevant： 

“Article 1 - Definitions.

1.08    ‘Associated Company’: any business entity, in which Philips, Sony, Pioneer or a licensee controls, directly or indirectly, more than fifty per cent (50%) of the shares entitled to vote for the election of directors, but any such business entity shall be deemed an Associated Company only for as long as such control exists.

Article 2- Grant of rights

2.01.   For the term of this Agreement, Philips hereby grants to Licensee and its Associated Companies a non-exclusive, non-transferable licence under the Licensed Patents to manufacture Licensed Products within the Territory and to use, sell or otherwise dispose of Licensed Products so manufactured in all countries of the world.

Article 3 - Have made.  

3.01    The rights granted to Licensee and its Associated Companies pursuant to Article 2 include the right for licensee and its Associated Companies to have third parties manufacture for Licensee’s or its Associated Companies’ use an account, in accordance with the provisions hereof, such components as Licensee and/or its Associated Companies require in connection with the manufacture of Licensed Products, provided that such third parties agree to observe the secrecy obligations excepted by Licensee hereunder….

Article 4 - Royalties, Reports and Payments

4.02    In consideration of the rights granted hereunder by Philips to Licensee, Licensee agrees to pay to Philips royalties on each Licensed Product sold by Licensee or any of its Associated Companies, in which any one or more Licensed Patents is(are) used, irrespective of whether such Licensed Patents is (are) used in the country of manufacture, use, sale or other disposal.

Article 9 - Assignment.

9.01    This agreements shall inure to the benefit of and be binding upon each of the parties hereto and their respective assigns.  It may not be assigned in whole or in part by a Licensee without the prior consent in writing of Philips except in the event of a bona fide and solvent merger, consolidation or other transfer of all or substantially all the assets of Licensee and accept the Licensee may freely assign this Agreement to any of its Associated Companies provided that Licensees shall remain liable hereunder and the assignee has the capability to perform all obligations on Licensee’s part hereunder.

Article 11 - Miscellaneous

11.02  This Agreement sets forth the entire understanding and agreement between the parties as to the subject matter hereof and supersedes and replaces all prior arrangements, discussions and understandings between the parties specifically relating thereto.  Neither party shall be bound by any warranty, waiver, release or representation, except as expressly provided herein, or as may subsequently be agreed in writing between the parties.”

15.The CD Player Agreement has also been produced and it contained clauses similar to those cited above.  The AC-3 and MPEG Agreements have not been produced.  However, from the excerpts contained in the amended statement of claim, it can be seen that they also contain similar terms.  There was, however, no dispute that no member in the OP group could fall within the definition of an associated company of either OP Electronics or OP Multimedia.

16.The defendants sought to have paragraph 29 struck out on the ground that it was either a pleading of an oral collateral contract or a representation.  The defendants further said that if it was a pleading of an oral collateral contract, the particulars of its making and the terms should be pleaded.  If it was a pleading of a representation, then the representation ought to be identified and reliance pleaded.  The defendants further referred to the “whole agreement clause” in article 11 to negate the existence of any collateral agreement.

17.The plaintiff did not say that it was relying on any collateral agreement.  The plaintiff argued that paragraph 29 set out the factual matrix and general background for the four agreements.  It further argued that the particulars under this paragraph supported a case that OP Electronics and OP Multimedia should be responsible under the four agreements to report to and pay the plaintiff all outstanding and ongoing royalties in respect of all CD and DVD players made or dealt with by any member of the OP group.  Furthermore, these particulars are repeated for the purpose of a plea of fraudulent misrepresentation appearing at a later part of the amended statement of claim.

18.The plaintiff also referred to the cases of Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912F to 913F and Jumbo King Ltd v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 281 and 296D to I to support its argument that the four agreements should be construed in a way to make OP Electronics and OP Multimedia responsible for the royalties payable by all members of the OP group.

19.Having considered these authorities, I do not think I can accept the plaintiff’s construction of the four agreements.  There is no question over the meaning of any of the relevant clauses in the agreements.  There is also no problem of wrong words or syntax or linguistic mistakes.  The terms of the agreements are clear and the choice of parties made consciously.  The plaintiff might have been misled, but it does not mean that the plain meaning of the agreements can be twisted to implement the plaintiff’s intention.  This is not a claim for rectification of the terms of the agreement. 

20.Regardless of the plaintiff’s intended basis for the four agreements and the apparent willingness of the OP group to operate on the same basis, the terms of the four agreements simply cannot be construed to mean what is not written there.  I do not agree with the plaintiff’s submissions that the interpretation process can rewrite the identity of the licensee of the four agreements to OP Holdings or change the definition of associated company or extend the royalty obligations of OP Electronics or OP Multimedia to cover all members of the OP group.  I decide against the plaintiff on this.  However, I will not strike out this paragraph as it supplied the background of the agreements.  It is also relevant to the other claims.

21.Paragraphs 30 to 58 of the amended statement of claim dealt with the terms of the four agreements.  Paragraph 59 to 65 pleaded that OP Electronics and OP Multimedia had manufactured and sold CD and DVD players and had reported to and paid the plaintiff the royalties purportedly for compliance with the agreements.

Breaches of agreements

22.The plaintiff then pleaded in paragraph 66 that OP Electronics had breached the CD Player Agreement by not providing to it complete and accurate statements of all the CD products covered by the CD Player Agreement which had been made, used, sold or otherwise disposed of by it or made for or supplied to it by third parties both before and after the commencement of the CD Player Agreement.  OP Electronics had thus failed to pay the plaintiff the full and proper royalties with respect to these CD products.

23.The particulars of breach under paragraph 66 referred to omissions in the reports of OP Electronics on sales of CD players to specific customers covering specific periods and sales of CD players for in-car use.  Paragraph (d) of the particulars also stated that because of the long-standing and repeated attempts of the 1st to 17 defendants to conceal from the plaintiff the sales by the members of the OP group, there would be further transactions in the nature of those referred to above which the plaintiff could not particularise before discovery.

24.In relation to the DVD, AC-3 and MPEG Agreements, the plaintiff pleaded similar breaches against OP Multimedia in paragraphs 69, 72 and 75 except that the period of breach ended on 4 September 2001 when these agreements were allegedly terminated by the plaintiff. 

25.The defendants submitted that the particulars of breach did not refer to the sales as having been made by OP Electronics or OP Multimedia.  The essential element of breach was therefore lacking.  The plaintiff in reply did not maintain that the sales were indeed made by OP Electronics or OP Multimedia, but argued that under the four agreements, OP Electronics and OP Multimedia had to pay royalties for the CD and DVD players sold by other companies in the OP group. 

26.I have already decided above that the four agreements could only cover OP Electronics and OP Multimedia on the CD and DVD players dealt with by them and not by the other members of the OP group as none of them could qualify as an associated companies of OP Electronics or OP Multimedia.  These particulars therefore cannot stand.  In the usual case, if a claim can be cured by particulars, an opportunity should be given for particulars to be furnished instead of striking it out.  However, the plaintiff has already provided particulars which cannot stand.  I do not know if the plaintiff can provide fresh and viable particulars to support paragraph 66.  I therefore strike out the whole of paragraph 66 but give the plaintiff liberty to apply to restore this paragraph or any part of it with fresh and viable particulars.

27.For the same reason I strike out paragraphs (a) to (e) and (g) of the particulars of breach under paragraph 69 but would not strike out the rest of this paragraph as paragraph (f) of the particulars of breach is viable.  It referred to a report published by the Hong Kong Trade Development Council saying that OP Multimedia had produced 1.2 million DVD players in the 18 months prior to October 2000 but the royalty reports given by OP Multimedia to the plaintiff did not reflect this quantity. 

28.Paragraph 72 and 75 repeated the particulars of breach pleaded under paragraph 69 in support of allegations of breaches of the AC-3 and MPEG Agreements.  The striking out of particulars under paragraph 69 produced similar results for paragraphs 72 and 75.  

29.There are also allegations of other breaches of the four agreements by failure to furnish the plaintiff with verification by external auditors and failure to notify the plaintiff of the identity of third parties which made or supplied licensed products to OP Electronics and OP Multimedia.  These allegations can stand.

Inducing breach of agreements

30.The plaintiff pleaded in paragraph 76 that OP Holdings, the 7th to 10th defendants, Yeung, Poon and Wu were aware of the existence of the CD Player Agreement and had induced or procured breaches of this agreement by OP Electronics as pleaded in paragraph 66 to 68.  It also repeated the matters of knowledge and negotiation pleaded in paragraph 26.  It further pleaded that OP Electronics and the 7th to 10th defendants were members of the OP group that were under the control and management of OP Holdings, Wu and Poon and that Yeung was the company secretary of OP Holdings and the 7th to 10th defendants. 

31.Under particulars of inducement or procurement, the plaintiff pleaded that OP Holdings, the 7th to 10th defendants, Yeung, Poon and Wu had persuaded and enticed OP Electronics not to submit to the plaintiff proper and complete statements to account for all the CD products covered by the CD Player Agreement and not to pay all royalties due to the plaintiff.  There is also an alternative pleading that OP Holdings, Yeung, Poon and Wu had enticed/procured OP Electronics and the 7th to 10th defendants to have committed the acts of inducement and procurement. 

32.There is a similar averment in paragraph 77 in relation to the DVD, AC-3 and MPEG Agreements and OP Multimedia.  It was pleaded against OP Holdings, the 6th defendant, “OP Video Manufacturing”, Yeung, Poon and Wu.

33.The defendants complaint that paragraph 76 did not plead any specific act of inducement or procurement.  The plaintiff replied that there were particulars of inducement as against the other defendants because the four agreements should cover all members of the OP group.

34.I am of the view that there are particulars of inducement and procurement pleaded.  OP Holdings was the parent company of OP Electronics and OP Multimedia.  It had the power to control the actions of its subsidiaries.  All three companies had the same management team, which was comprised of Yeung, Poon and Wu and possibly others.  The plaintiff is entitled to plead and prove at the trial that OP Holdings had induced or procured the breaches of the CD Player Agreement as pleaded in paragraphs 67 and 68.  Regarding Yeung, Poon and Wu, they are being sued as joint tortfeasors.  In the light of their positions in the OP group, the particulars of their knowledge of the plaintiff’s rights in the patents and the particulars pleaded under paragraph 29, I am the view that the plaintiff is entitled to sue them as joint tortfeasors for inducement and procurement (see Standard Chartered Bank v Pakistani National Shipping Corporation & Ors (No. 2) [2000] 1 Lloyd’s Reports 218 at 230 to 231 (paragraphs 62 to 67) and 233 to 235 (paragraphs 16 to 21)). 

35.However, in the light of my decision on the construction of the agreements, I would strike out the 7th to 10th defendants from this paragraph as they were not within the scope of the CD Player Agreement.  I also strike out all the references to paragraph 66 as this paragraph has been struck out.

36.Regarding paragraph 77 in relation to the DVD, AC-3 and MPEG Agreements, I would strike out all references to OP Video Manufacturing as it was not within the scope of these agreements.  I also strike out paragraph (b) of the particulars of knowledge under this paragraph as it is only meaningful in relation to OP Video Manufacturing.

Acts of Infringement of Patent

37.Paragraphs 78 to 80 pleaded infringement of patents by the defendants.  The particulars of infringement stated that the 2nd, 7th, 8th, 9th, 10th and 14th defendants had infringed the plaintiff’s CD patents by importing CD players into Hong Kong and the 2nd, 4th, 5th, 6th, 7th, 8th and 11th defendants had done the same thing in relation to the DVD patents.

38.The defendants submitted that the plaintiff have not complied with Order 103 rule 20 in not identifying any specific infringement.  I disagree with the submission.  The particulars of infringement have referred to the patents and the defendants’ knowledge that licence was required from the plaintiff before they could use the patents.  The particulars of infringement, when read in conjunction with the amended statement of claim, have complied with Order 103 rule 20.

39.Paragraph 80A pleaded that the acts of infringement were done pursuant to a common design.  The pleadings of conspiracy to damage the plaintiff by unlawful means appearing at a later part of the amended statement of claim were repeated under this paragraph to supply the elements of a common design.  The defendants argued that there was no factual matrix for the common-design claim.  I disagree, as the pleadings on conspiracy repeated under this paragraph are adequate for this purpose.  Though I will strike out some parts from the claim of conspiracy, the remaining part is viable and can supply all the necessary elements for the claim of common design.  I also refer to the case of Unilever Plc v Gillette (UK) Ltd [1989] RPC 583 at 608-609 on common design.

40.Paragraph 80B pleads an alternative that the infringements were counselled, directed, commanded or procured by the 1st, 15th 16th and 17th defendants.  I do not think this claim can be struck out. 

41.Paragraph 80C then stated that each of the 17th defendants were jointly and severally liable for all the acts of infringement.  I find this plea problematic.  There were some defendants who were members of the OP group that had not infringed the CD patents whilst there were other defendants who had not infringed the DVD patents.  Those who had only infringed the CD patents should not be liable for infringement of the DVD patents and vice versa.  It was not necessary for a company not involved in the manufacturing or sale of CD players to join the common design to infringe the CD patents.  There was also no reason for it to take part in it.  Insofar as infringement of CD patents was concerned, such company was in the same position as any other member of the OP group which was wholly innocent of any infringement of any CD or DVD patent.

42.Even the plea of common design in paragraph 80A would have to be split into two parts.  I cannot see how a defendant who has not dealt with any CD can be said to be part of the common design to infringe the CD patents save and except the 1st, 15th, 16th and 17th defendants who were in control.  These other defendants should therefore not be liable for any infringement of the CD patent.  The amended statement of claim does not contain anything that would suggest otherwise.  I would therefore amend paragraph 70 to 80C to separate these claims into two groups.  One group is in relation to the infringement of the CD patents by the 1st, 2nd, 7th, 8th, 9th, 10th, 14th, 15th, 16th and 17th defendants, and by these defendants pursuant to a common design.  The other group is in relation to the infringement of the DVD patents by the 1st, 2nd, 4th, 5th, 6th, 7th, 8th, 11th, 15th, 16th and 17th defendants, and by these defendants pursuant to another common design.  Paragraph 80B would also have to be amended to reflect the splitting of claims.

Concealment of acts complained

43.The plaintiff pleaded in paragraphs 81 to 106 that the OP group had repeatedly lied to the plaintiff on the number of CD players and DVD players made and sold by the OP group.  Attempts by the plaintiff and its auditors for access to the documents of the OP group for verification had been frustrated.  The DVD, AC-3 and MPEG Agreements were thus terminated by the plaintiff on 4 September 2001, but OP Multimedia did not regard the agreements as having been terminated and continued to purportedly comply with and pay royalties pursuant to them.

44.In paragraph 100, the plaintiff pleaded that the defendants had sold many DVD players as referred to in the particulars of infringement and the additional transactions particularised under that paragraph.  In paragraph 101 the plaintiff pleaded that the defendants had not disclosed to the plaintiff the transactions referred to in paragraph 100.  The plaintiff further pleaded in this paragraph that the royalty reports submitted by OP Multimedia under the DVD, AC-3 and MPEG Agreements prior to their termination were false as the reports did not contain the DVD players particularised in paragraph 100 or that the reports did not refer to the manufacture and sale of DVD players by other members of the OP group.  It further pleaded that, either way, the 2nd, 4th, 5th, 6th, 7th, 8th, 11th, 12th and 13th defendants had thereby concealed the true number of DVD players manufactured and/or sold by the OP group. 

45.The defendants attacked this paragraph on the ground that the falsity was not supported by any factual plea and there was no pleading of any duty to disclose.  I think this attack is on the basis that the DVD, AC-3 and MPEG Agreements only bound OP Multimedia and not the other members of the OP group.  The plaintiff, in reply, submitted that the matters in this paragraph are relevant to all causes of action pleaded. 

46.Since I have held that the three agreements aforesaid did not have the broad effect as contended by the plaintiff, the second sentence in this paragraph has to be amended to the effect that the royalty reports were false in that they did not include DVD players that had been manufactured or sold by OP Multimedia as referred to in paragraph 100.  This sentence should not refer to the other defendants as the reports were for compliance with the three agreements and the three agreements only cover the DVD players manufactured and/or sold by OP Multimedia.

47.The third sentence in this paragraph should also be amended by deleting the words “either way,” at the beginning, removing all references to the defendants other than the 5th defendant, and substituting the “OP group” by the 5th defendant.

48.For the same reason, paragraph 105, in relation to the CD Player Agreement and OP Electronics should be amended in a similar way. 

Misrepresentations

49.Paragraph 107 to 118 pleaded the cause of misrepresentation in relation to the manufacture and/or sale of CD players and the CD Player Agreement.  The defendants sought to strike out this part by saying that there was only one alleged representation, the pleading of when or how the misrepresentation was made was imprecise and no act of reliance could be identified.  However, these are misplaced criticisms.  There are sufficient particulars on the representations, their falsity, the plaintiff’s reliance on them to enter into the CD Player Agreement with OP Electronics and not insisting on having OP Holdings as its counterpart in this agreement, and hence the plaintiff suffered loss.  I do not think the defendants have made out any valid ground for striking out this part. 

50.The same can be said on the claim of misrepresentation in relation to the DVD AC-3 and MPEG Agreements and OP Multimedia.  However, for the same reasons that I have given for splitting the claims for patent infringement into two groups, the same should be done to the misrepresentation claims. 

51.For paragraphs 107 to 116, the reference to the 1st to 17th defendants should be changed to the 1st, 2nd, 7th, 8th, 9th, 10th, 14th, 15th, 16th and 17th defendants.  Furthermore, the particulars of falsity in paragraph 115(a) referred to paragraph 66 which has been struck out.  I allow the plaintiff to repeat under paragraph 115(a) the particulars of breach that have been struck out under paragraph 66.

52.On the plaintiff’s case, it has suffered loss and damage because of fraudulent misrepresentation.  It should thus be awarded such damages as will put it into the financial position it would have been in if the misrepresentation had not been made, not the position it would have been in had the misrepresentation been true (see Chitty on Contracts 29th ed. paragraph 6-049 to 6-058).

53.The plaintiff has pleaded in paragraph 113 that by relying on the misrepresentation, it did not insist on entering into the CD Player Agreement with OP Holdings and thus was denied of the opportunity to collect the royalties it would have been entitled to on all CD players made and/or dealt with by OP Holdings and its subsidiaries.  In paragraph 114, it pleaded that in reliance on the said misrepresentations, it also did not commence proceedings against members of the OP group in relation to the manufacture and dealings in CD players which constituted infringement of the plaintiff’s patents.

54.The original paragraph 117 then pleaded the plaintiff’s entitlement to damages under section 3(1) of the Misrepresentation Ordinance Cap.284.  However, the plaintiff has amended this paragraph under Order 20 rule 3 by inserting a phrase to qualify the plaintiff’s loss to be the royalties which should have been reported to it by OP Electronics or by other defendants through OP Electronics.  This was to say that the royalties were due to the plaintiff from all members of the OP group pursuant to the CD Player Agreement.  I have already held that this was not the case.  This amendment was thus incorrectly made and I disallow it.  Without the amendment, paragraph 117, when read in conjunction with paragraphs 113 and 114, is a correct pleading of the plaintiff’s loss. 

55.For the same reason, the reference to the 1st to 17th defendants in paragraphs 119 to 128 should be replaced by the 1st, 2nd, 4th, 5th, 6th, 7th, 8th, 11th, 15th, 16th and 17th defendants.  I also allow the plaintiff to repeat under paragraph 127(a) the particulars that have been struck out under paragraph 69.  I also disallow the amendment made to paragraph 129 in relation to royalties of DVD players not reported to the plaintiff by or through OP Multimedia.

Conspiracy to damage the plaintiff by unlawful means

56.The defendants complaint that no unlawful scheme was identified in the pleadings, the language used was vague and imprecise and the particulars of breach were not actually particulars.  The plaintiff submitted in reply that the overt acts and unlawful means had been pleaded, namely, the infringement of the plaintiff’s patents, the misrepresentations and the breaches of contract by OP Electronics and OP Multimedia, as induced or procured by the 1st, 15th, 16th and 17th defendants.  I agree with the plaintiff.  All the elements of a conspiracy to injure the plaintiff by unlawful means are there.

57.However, I would split the conspiracy into two: one was to injure the plaintiff by infringing its CD patents and the other by infringing the DVD patents.  The reasons are the same as for splitting the infringement claims, the common design claims and the misrepresentation claims.  One conspiracy should relate to the CD patents and the 1st, 2nd, 7th, 8th, 9th, 10th, 14th 15th, 16th and 17th defendants.  The other conspiracy should relate to the DVD patents and the 1st, 2nd, 4th, 5th, 6th, 7th, 8th, 11th, 15th, 16th and 17th defendants.  I would also strike out from paragraph 134 the reference to paragraph 66 and replace it by a reference to paragraph 67.

Unlawful interference

58.This claim stands with the conspiracy claim, but it should also be split into two claims as having been done for the conspiracy claim.

The 3rd, 12th and 13th defendants 

59.These three defendants have been made subjects of various claims because they had allegedly manufactured and/or exported from the Mainland to foreign places some DVD and CD players.  The particulars are in paragraphs 100(f), 104(c) and 104(e).  There is no allegation that these defendants had sold any CD or DVD players in Hong Kong or had shipped these products through Hong Kong which infringed the plaintiff’s Hong Kong patents.  There is also no allegation against them in the particulars of infringement.  The alleged transactions were of a different category as the plaintiff did not suggest that they had anything to do with Hong Kong or that royalties were payable for them in respect of the Hong Kong patents.  In the premises, I do not see why these defendants should have taken part in any common design or conspiracy.  It was also unnecessary for any misrepresentation to have been made for their transactions.  If these defendants should have been named in the particulars of infringement, the position would have been entirely different.  I therefore strike out paragraphs 100(f), 104(c) and 104(e) and these three defendants from this action.

Foreign patents

60.Finally, I also strike out paragraph 8A and 134(j) and they relate to foreign patents.  The plaintiff had conceded, in the course of the hearing, that they should be struck out.

Costs order nisi

61.Finally, I make a costs order nisi that the plaintiff do pay the 3rd and 12th defendants their costs of this action including their applications to strike out, to disallow amendments and for further and better particulars.  I also make an order nisi that the plaintiff do pay the other defendants, save and except the 13th, 18th, 19th and 20th defendants, 30 per cent of the costs of their applications to strike out and to disallow amendments.  I order only 30 per cent of the costs because these defendants have not succeeded much in their applications.

Mr Peter Garland, SC and Mr Stewart K M Wong, instructed by Messrs Herbert Smith, for the Plaintiff

Mr John Kerr and Ms Margaret Lau, instructed by Messrs Lee & Chow, for the 1st, 3rd, 4th, 6th, 7th, 8th, 9th, 10th, 11th, 12th and 14th Defendants; and instructed by Messrs C L Chow & Macksion Chan, for the 2nd and 5th Defendants; and instructed by Messrs Chan, Wong & Lam, for the 15th, 16th and 17^th Defendants

The 13th Defendant, in Person, absent

The 18th Defendant, in Person, absent

The 19th Defendant, in Person, absent

The 20th Defendant, in Person, absent