Bang & Olufsen a/S v. To Hok Chung t/a Mirage Electronics Industrial Co

CACV 207/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 207 OF 2006

(ON APPEAL FROM HCA 2596 OF 2005)

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BETWEEN

Before : Hon Cheung JA and Hon Waung J in Court

Date of Hearing : 30 November 2006

Date of Judgment :  11 December 2006

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J U D G M E N T

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Hon Cheung JA :

1.The plaintiff applied for summary judgment against the defendant for infringement of its registered design and also for infringement of its copyright in certain design drawings.  Deputy High Court Judge Muttrie dismissed the application.  The plaintiff now appeals against the judgment but only in respect of its claim for infringement of the registered design. 

Facts

2.The plaintiff is a well-known manufacturer and seller of high-quality audio visual equipment.  It is the owner of a design (‘the design’) registered in Hong Kong on 21 July 2003 under Certificate of Registration of Design Number 0311139.0.  According to the register of the Designs Registry of the Hong Kong Government, the article in respect of the design is described as ‘A music system’.

3.The article consists of an oval-shaped player or control unit (‘control unit’) into which a DVD or VCD or CD disc may be placed.  The cover of the unit is in two parts on the upper side of the oval.  They slide apart to reveal the spindle or turntable onto which the disc is placed.  There is also a transparent plastic cover which comes up and then sets down on top of the disc so that it may be played.  The shape and configuration of the control unit can be seen from drawings attached to the Certificate of Registration and also from the sales brochure of the control unit.   

4.According to the plaintiff the defendant infringed the design by importing into Hong Kong, offering for sale and selling in Hong Kong products incorporating designs which are not substantially different to the design.

5.The defendant carries on trade under the name of Mirage Electronics Industrial Co. (‘Mirage Industrial’) as a sole proprietor with a registered address in North Point, Hong Kong.  He is also the Chairman of the Board of Mirage Electronics (Shenzhen) Company Limited (‘Mirage Shenzhen’).  He is an investor and the designated legal representative of Mirage Shenzhen. 

6.Mirage Shenzhen was registered on 10 February 2002.  The scope of its business was described as the manufacture and sale of VCD, DVD and CD players, household electric appliances and relative accessories.   

7.The Danish Customs authorities had seized a consignment of goods, namely DVD players, shipped from Hong Kong by the defendant to a Danish company, Good Buy Company A/S (‘Good Buy’) in Denmark. 

8.According to the colour photographs of the two DVD players seized by the Danish Customs the shape and configuration of the DVD players were similar to the design of the plaintiff’s products.  No issue arises in this case about the similarity. 

The issues

9.Counsel for the parties, namely Mr Anson Wong for the plaintiff (who only appeared in this appeal) and Mr Philips Wong for the defendant have conducted this appeal with skill and they have succinctly identified two issues for the Court’s consideration.  The first is whether the design was registered in respect of an article and the second is whether the defendant had imported the goods into Hong Kong. 

Registered Designs Ordinance

10.Section 5(1) of the Registered Designs Ordinance, (‘RDO’) Cap. 522 provides that

‘(1)     Subject to this Ordinance, a design which is new may, upon application by the person claiming to be the owner, be registered in respect of any article or set of articles specified in the application.’

11.Article is defined in section 2(1) as

‘ “article” （物品）means any article of manufacture and includes any part of an article if that part is made and sold separately;’

12.The rights conferred by the registration of the design is provided by section 31(1) of RDO

‘(1) Subject to this Ordinance, the registration of a design under this Ordinance gives to the registered owner the exclusive right―

(a) to make in Hong Kong or import into Hong Kong―

(i) for sale or hire; or

(ii) for use for the purpose of trade or business; or

(b)   to sell, hire, or offer or expose for sale or hire in Hong Kong, any article in respect of which the design is registered and to which that design or a design not substantially different from it has been applied.’

The Article

13.Section 5(1) of RDO provides that a design may be registered in respect of an article.  Some confusion has been caused in this case about the article covered by the design.  This confusion is contributed to a certain degree by the description of the article given by the plaintiff in its affidavit in support of the application for summary judgment.  The plaintiff claimed that one of its products is BeoCenter 2, a high end integrated audio and video system which is sold at a recommended retail price in Hong Kong of HK$32,800.  According to the sales brochure of BeoCenter 2, it is ‘divided into a control unit and a separate socket panel, with a single cable linking the two.  The elegant control unit is thus kept clear from any cables and cords.  The separate socket panel gathers all the connections to speakers, television, aerial and other units.  It can be placed on the floor, by a skirting board or hidden completely away’.

14.The defendant argued, as it had done before the judge, that the design is not valid because it is the design of only part of an article.  That part is the oval-shaped control unit and it is not made or sold separately in accordance with the definition of section 2(1).  The article encompasses both the control unit and the socket panel.

15.In my view the proper time to look at the validity of the registration is at the time of the registration itself.  Whether the article comes within the definition of section 2(1) must be determined by reference to the specifications contained in the application for registration.  Hence whether a design is in respect of an article or not cannot be determined by reference to how the article is being sold or packaged in the market after the registration. 

16.Much of the confusion before the judge is caused by a failure to draw this distinction.  Information on the BeoCenter 2 only provides the background information as to how the whole audio visual system works.  This cannot be determinative of the issue whether the control unit is an article within the definition of section 2(1).  This view is supported by both the RDO itself and by authorities. 

17.Section 45 of RDO provides that

‘ The court may, on application by any person, order the registration of a design to be revoked on the ground that, at the time of its registration, the design was not new or was not registrable for any other reason.’  (emphasis added)

18.Although the defendant has not invoked the revocation proceeding, it has challenged the validity of the registration of the design.  Based on section 45 the relevant time must be at the time of the registration. 

19.In Ford Motor Company Limited’s Design Applications [1995] RPC 167 Ford Motors applied for registration of designs of various motor vehicle components, such as door panels, steering wheels, seats, bonnet top and wheel covers.  An issue arose as to whether the components were articles within the words of section 44(1) of the Registered Designs Act 1949 :

‘ any article of manufacture including any part of an article if that part is made and sold separately.’ 

20.The Registered Designs Appeal Tribunal held that the components were not articles because apart from forming part of a complete vehicle, they had no reality as articles of commerce.  The matter went to the House of Lords.  Lord Mustill dealt with the following argument which he summarised at page 177 :

‘ The argument in support of the appeal has been put in various ways.  Of these the most attractive, and the one which reflects most closely the use of the present tense in the definition (“ ... if that part is made and sold separately”), is to consider the component as at the time when the relevant operation takes place.  In relation to a spare part one asks first whether it is made separately, and finds that it is; for its fabrication is not part of the manufacture of an entire vehicle.  Equally, the part is sold separately; for the customer buys it without at the same time buying the rest of the car.  The article thus satisfies both tests.’

21.Lord Mustill rejected this argument.  He held that

‘ Whilst acknowledging the attractions of this approach, I am unable to adopt it.  In the first place it must, I believe, entail that every spare part is an article, with the exception of those acquired at the time of the original purchase, a result which if intended could have been achieved by a much more direct form of words.  Furthermore, in some circumstances the proposed reading would be unworkable.  Take, for instance, the case of prefabricated components put into stock when made and then drawn upon either to be incorporated into complete units or sold as spare parts.  If one attends to the way in which the components are actually employed the position will be that some are made and sold separately, and hence qualify as articles, and others are not; yet the design of each is exactly the same, and the design must be either registrable or not registrable.  This anomaly exists because the argument looks at the characteristics of each individual article once produced and put into circulation.  If the Act had been concerned with, say, consumer protection, this would no doubt have been correct.  But here the legislation is concerned not with finished articles but with the design sought to be registered, ex hypothesi before the articles are made; and the articles themselves are relevant only because they form the media through which the designs intended to be registered under the statute will be put into effect.  One must therefore look, not to the history of articles which already exist, but to the characteristics which they will have when the design fulfils its intended purpose.  I can therefore see no escape from the conclusion reached by Graham J. in the Sifam case ([1973] RPC 899) that section 44(1) must be read as meaning “... if that part is to be made and sold separately”.’

22.What Lord Mustill said applies to this case as well.  The confusion exists in this case because the parties had looked at the characteristics of each individual article once produced and put into the market.  Instead one should look, not to the history of articles which already existed, but to the characteristics which they will have when the design fulfils its intended purpose.  In the present case the design is in respect of the control unit only.  The control unit is an article of manufacture.  There is no indication in the particulars of the registration that the control unit is part of an article.  Hence the argument that the control unit is only part of an article simply does not arise in the first place. 

23.The case of Samsonite Corp v. Make Rich Limited [2002] 1 HKC 692 does not assist the defendant at all.  In that case the plaintiff claimed registered design protection in respect of a ‘big wheel feature’.  The registrability of the design was challenged.  As shown at page 701 of the judgment, the design was in respect of ‘wheel assembly for an upright luggage case’.  It was held by Deputy High Court Judge Gill that the registration is invalid.  Based on the description of the design the big wheel feature was clearly a part of an article namely, the luggage which was not covered by design registration.  There was no evidence that this ‘big wheel feature’ was made and sold separately.  Hence the ‘big wheel feature’ could not come within the definition of section 2(1). 

24.The situation here is different.  The particulars of the registration does not show that the control unit is a part of an article.  It is an article itself.  The words ‘A music system’ may be wide in scope but the scope has to be defined by what was actually covered by the design, namely, the control unit only.  In my view the design is valid because it is in respect of an article and the arguments on part of the article simply does not arise. 

Importation

25.The second issue concerns the factual issue of importation. 

26.The Danish Customs had provided the plaintiff with shipping documents in respect of the consignment which contained the infringing articles.  They included :

(1)   an airway bill dated 3 December 2005 showing that goods were shipped by Mirage Shenzhen from Hong Kong to Good Buy.  The goods shipped were described as DVD players.  The shipper in the airway bill was Mirage Shenzhen.  The consignee was Good Buy.  The airway bill contained the following endorsement ‘T/5 CGO FM CHINA TO BLL VIA HKG BY COURIER UNDER AWB NO. : 3600191 ON 19 DEC 2005’.  The parties agreed that the words mean ‘T/5 cargo from China to Billund via Hong Kong by courier under airway bill number 3600191.....’.  Billund is the place where Good Buy operates.

(2)   a pro-forma invoice showing that 60 pieces of DVD players were sold to Good Buy.  Although it bore the name of Mirage Shenzhen it also gave instructions for payment to be made to the defendant in a bank account in Hong Kong.  The following words appeared at the bottom of the invoice in respect of the signature clause : ‘FOR AND ON BEHALF OF MIRAGE ELECTRONIC INDUSTRIAL CO’.  This part was stamped and signed. 

27.The Packing List showed the sale of goods from the defendant to Good Buy comprising of 60 DVD players to be shipped as well as four other products with the model with the same model number.

The defence 

28.The defendant claims that Mirage Industrial is a window company and has no trading business of its own.  The purpose of setting up this company was because of the foreign exchange problems encountered by Mirage Shenzhen which is based in the Mainland.  The defendant claimed this problem could be solved if Mirage Shenzhen has a window company in Hong Kong to collect and pay money.  He further claimed that the transaction in this case was between Mirage Shenzhen and Good Buy and Mirage Industrial was not a party.  The reason why the packing list was in the name of Mirage Industrial was because the airlines required packing list to be issued in the name of a company of the place of departure and it was in order to comply with this requirement the packing list was issued in the name of Mirage Industrial.  The only reason why Mirage Industrial was named as a beneficiary in the pro-forma invoice was to overcome the foreign exchange problem.  He denied he or Mirage Industrial had sold any alleged infringing products to Good Buy. 

29.In Mattel Inc v. Tonka Corporation [1991] 23 IPR 91 Deputy High Court Judge Andrew Li Q.C. (as he then was) dealt with the meaning of the word ‘import’ in section 5(2) of the Copyright Act 1956 UK as extended to Hong Kong.  He held that the word ‘import’ should be given its ordinary meaning.  It simply means bringing into Hong Kong. 

30.In Grammophone Company of India Ltd v. Pandey and others [1985] FSR 136, the Supreme Court of India considered the meaning of ‘importation’ under the India Copyright Act.  At page 154 Chinnappa Reddy J held that ‘the word “import” means bringing into India from outside India and it is not limited to importation for commerce only but includes importation for transit across the country’. 

31.Likewise in my view the word ‘importation’ under RDO must be given its ordinary meaning as well.  It simply means bringing goods into Hong Kong.  The Airway Bill clearly revealed that the articles were brought into Hong Kong from its place of manufacture in China.  Hence the infringement by importation has occurred.  The real issue in this case is whether it was the defendant who imported the articles to Hong Kong.  Mirage Industrial had been in existence even before Mirage Shenzhen was registered.  Hence the contention that Mirage Industrial was set up simply as a window for Mirage Shenzhen to overcome foreign exchange problems could not be right.  In this case the defendant was the Chairman of the Board of Mirage Shenzhen.  The contemporaneous documents showed that he was the beneficiary of the proceeds of sale of the infringing articles.  The pro-forma invoice was also chopped and signed on behalf of Mirage Industrial.  It was also Mirage Industrial who prepared the packing list.  If he is to deny that he did not import the goods to Hong Kong at all then he has to condescend to give particulars, for example, that he had no knowledge whatsoever about this particular transaction and he had not authorised Mirage Industrial to be involved.  On the contrary, based on the documents, the involvement of Mirage Industrial was clearly established.  In my view his defence that the plaintiff has sued the wrong party is not a credible defence.

Judgment for the plaintiff

32.As these two issues are resolved in favour of the plaintiff, judgment for the infringement of the design should be given to the plaintiff. 

33.Mr Philips Wong for the defendant does not challenge that the plaintiff is entitled to the following orders that I would give in the event that judgment is to be given to it :

1.    Judgment be entered for the plaintiff in respect of the its claims for design infringement;

2.    A declaration that the defendant has infringed the exclusive privileges and rights under the Certificate of Registration of Design No. 0311139.0 (the ‘design’);

3.    The defendant be restrained whether acting by himself, his employees, servants or agents, or any of them or otherwise howsoever from making, offering for sale (including via the Internet), selling, importing or keeping any product not substantially different to the design;

4.    The defendant do deliver up to the Plaintiff’s solicitors all articles in his possession, custody or control the continued use of which would offend the aforesaid injunctions and all articles, devices and materials used in the manufacture of the products referred to in the above paragraphs, their containers and packaging.

5.     The defendant do file and serve an affirmation within 21 days of service of this Order confirming the above delivery up;

6.     The defendant do disclose with 21 days on oath and affirmation the names, addresses and full contact details of all suppliers and customers of infringing products;

7.     There be a trial as to whether the defendant is liable to pay damages and, if found liable to pay damages, an assessment as to the damages payable by him for his acts of registered design infringement.

34.There would be the orders accordingly.

Costs

35.The parties further agreed that the plaintiff is to have the costs of the appeal and that there should be no order as to costs in relation to the Order 14 application and the hearing before the judge.  I would so order.

Hon Waung J : 

36.I agree.

Mr. Anson M. K. Wong, instructed by Messrs Lovells, for the Plaintiff

Mr. Philips B. F. Wong, instructed by Messrs Benny Kong & Peter Tang, for the Defendant