Meyer Intellectual Properties Ltd v. Lee Yuen Housewares Co Ltd
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HCA 1978/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1978 OF 2006 ______________________ BETWEEN
______________________ Before : Deputy High Court Judge Gill in Chambers Date of Hearing : 15 August 2007 Date of Judgment : 4 September 2007 ______________________ J U D G M E N T ______________________ 1.This dispute is a contest about who is the owner of copyright in the design of a product known as the Hot Chocolate Maker; was it the customer and now its successor, or the designer responsible for the working drawings and the making? If the former, should it be entitled to protection from prospective future infringement? 2.The matter came to light when the successor Meyer found out that the designer Lee Yuen had registered the design of the product in Hong Kong and the PRC at about the time Meyer had decided to take its business away from Lee Yuen to another supplier. By this action it sues for a declaration that it is the owner of the copyright, a quia timet injunction, an enquiry into damages and other related orders. 3.The matter before me is an application for summary judgment for such relief, save for the enquiry into damages. Meyer is content to rely on the assurance given on behalf of Lee Yuen that it has not dealt with anybody else concerning the Hot Chocolate Maker, so there is no actionable loss. Background 4.The original customer was a Californian based company called Bonjour Incorporated, with whom Lee Yuen had a relationship lasting for some 10 years up to mid-2005, when it, Bonjour, was sold lock, stock and barrel to Meyer. Meyer deals worldwide in kitchenware utensils and as such is the owner of well-known brands including Prestige, Salad Chef, Circulon and now Bonjour. 5.Lee Yuen, at all material times based in Hong Kong, as its main function designs, develops and markets various household products and kitchen utensils; some feature in a catalogue of original products. Many of those which are its original designs it has registered in Hong Kong or elsewhere. It will also pick up on a concept supplied by a customer and convert that into working drawings and then source a factory in China for the tooling and the manufacture of the product. The Issues 6.What is contended for by Meyer giving rise to this application is twofold. 7.The first is that it has copyright in the artwork giving rise to the product because an employee of Bonjour was the artist. Against this is the proposition that the first established artwork was a working drawing produced by designers employed by Lee Yuen. So that means copyright vests in Lee Yuen. 8.The second is that if it is established that Meyer owns the copyright, is it entitled to a quia timet injunction to restrain future infringement? The counter is that there has been no past infringing, which Meyer now accepts (having dropped its claim in damages) and demonstrably no threat or risk that it will happen in the future. 9.It is enough to defeat either or both of these applications if Lee Yuen is able to show it has an arguable defence and/or that there are triable issues. The Deponents 10.Those who have filed evidence include a director of Meyer called Mary Stutz and a director of Lee Yuen called Chung Kwok Biu. The Hot Chocolate Maker 11.Prior to the sale to Meyer Ms Stutz worked for Bonjour. Her duties included the development of new products. 12.She conceived the idea that this product might be marketable when she bought and studied a similar product developed by a competitor called Red Envelope. This comprises a round porcelain pot, wider at the top than at the bottom, with a hole in the lid from which protrudes a wooden spoon or mixer. Hot chocolate is made and poured into the pot, and then frothed up by the wooden spoon. 13.At the next of regular strategy meetings conducted by Bonjour, she raised the idea. The notes of that meeting, held on 6 December 2004 record:
14.The project was approved. 15.Team Concepts 129 is a Hong Kong based design company sometimes used by Bonjour to assist in the design of new products. 16.A co-worker of Ms Stutz, called Susie McCaffrey, towards the end of December 2004 faxed to Team Concepts 129 various sketches of the proposed porcelain pot, of varying shapes, with a wooden mixer protruding through the lid. The look of some of these was similar to the Red Envelope pot, although one had a base significantly wider than the top. 17.But shortly afterwards she and others decided that the wooden mixer should be substituted with a battery powered whisk, or frother. 18.Susie then sketched what she, Ms Stutz, describes in her affidavit as “the original design drawing of the Hot Chocolate Maker using her own independent skill labour and judgment and it was decided that it would be the design of the Hot Chocolate Maker to be developed produced and marketed by Bonjour”. 19.It is this sketch in which Meyer claims copyright. 20.The sketch, I am told, was drawn on or about 6 January 2005. I have seen it, and the finished product. They are quite similar. The shape of the pot that she decided upon was the one with the bigger base and smaller top. The frother so-called, emerges through a snap-on lid. There is written on the sketch “porcelain” (depicting the jug) “6 cup capacity because want room for mixing”, “clear snap on lid” and “frother”. 21.They decided not to use Team Concepts 129 but instead Lee Yuen, because they knew Lee Yuen had already designed and produced a frother that might be adapted for this product. 22.As it happened, a manager and designer of Lee Yuen called Timmy Hui was scheduled to meet Susie at Bonjour’s workplace on 12 January 2005 during a business trip he regularly undertook visiting US customers. 23.Following Bonjour’s decision to go with Lee Yuen in the project, there followed a series of emails between Susie and Timmy beginning on 6 January and running through to about 2 March, during the course of which they shared information as the concept was developed and refined before finally emerging as a sample and then marketable product. 24.These emails are important because they provide contemporaneous documentary clues as to who was entitled to lay claim to the artistic works from which the Hot Chocolate Maker emerged. 25.They are particularly important because neither Susie nor Timmy are apparently available to give evidence. It seems she did not go with Bonjour to Meyer after the sale, and he has left Lee Yuen under a cloud, following what it seems amounted to an unauthorized relationship with a competitor. 26.Susie opens the correspondence with this email sent on 6 January:
The response from Timmy came the next day:
And then on10 January he sent photos of what was described as a hot chocolate set that was to be exhibited as a product of Lee Yuen at a forthcoming trade fair. 27.I have seen the photographs. There is in fact no comparison with Susie’s sketch. The so-called set comprised a standard cylindrical coffee pot, including lid, a battery powered frother (not part of the pot) a cup, grater and spoon. 28.There followed the meeting of 12 January. 29.Ms Stutz deposes that amongst other prospective projects, the Hot Chocolate Maker was discussed in detail. She says they provided Timmy with a copy of Susie’s sketch with the explanatory words written across it. 30.Then, on 14 January from Susie:
And a follow-up on 20 January:
31.At some stage Susie drew another sketch, this time in colour. On it she had written, “yellow button” (this at the top of the frother) “chocolate coloured mixer”, “clear top”, “white porcelain body” and “logo on body” (the word “chocolate” is depicted). 32.It is not clear if this was sent or faxed to Timmy, but a clue that he did get it emerges from his email of 20 January, reference the yellow button:
Susie then called for a minor addition by this email of 25 January:
33.Then the working drawing emerged. This from Timmy of 27 January:
Susie commented:
34.I have seen the design. It is a working drawing whose dimensions are similar to the freehand version drawn by Susie in her original presentation. Furthermore, it contains explanatory words “6 cup want room for mixing” which are almost identical to those which appear on Susie’s sketch. 35.It is in respect of this drawing that Lee Yuen through its director Mr Chung claims to be the author and owner and thus in which it claims copyright. Of this he said:
Ms Stutz responded:
36.Further evidence points favourably towards Meyer’s case. Bonjour designed the artwork on the box which along with the product Lee Yuen arranged to be made. On it following the sale by Bonjour to Meyer, were printed the following words:
37.But then in support of Lee Yuen’s case Mr Chung refers to the document evidencing the sale of Bonjour to Meyer, headed Asset Purchase Agreement. This sets out in detail all the intellectual property rights included in the sale. But there is no reference to a Hot Chocolate Mixer. 38.The response to that, from Ms Stutz, is that the authors of the Asset Purchase Agreement anticipated that there might be errors and omissions because no due diligence was undertaken. It provides for all of Bonjour’s assets to be included whether itemized or not. 39.Ms Stutz has also filed what amounts to an affidavit made under section 121 of the Copyright Ordinance; the legal significance of this I shall come to shortly. Threat of Infringement? 40.Mr Chung, as can be read, asserts ownership in the copyright of the drawings from which came into being the Hot Chocolate Maker. 41.But even if that proves not to be the case, there is no threat that Lee Yuen will act in breach of that copyright. He deposed that the registration of the design in Hong Kong and the PRC, in late 2005, was to protect the interests of both Bonjour and Lee Yuen. He said there was an understanding that Lee Yuen would not deal with any other customer in the product. Lee Yuen has never done so, and has never formed the intention that it would. 42.He deposed that the then president of Bonjour had through Timmy Hui,
43.I should mention here that this is categorically denied by Meyer. 44.Further, prior to the writ issuing, Lee Yuen applied to surrender the design registration in Hong Kong. No such step has been taken in the PRC, but that is because the current registration will lapse in September, this month. 45.Mr Chung deposed:
The Legal Principles Order 14 RHC Applications for Summary Judgment 46.In Konstar Industries Ltd & Anor v Wong Yan Kwong & Ors, unreported, HCA 4240/99, Sakhrani J conveniently sets out at page 5 the principles governing applications for summary judgment:
Evidence of Ownership in Copyright 47.Section 121 of the Copyright Ordinance reads in part:
This does not amount to conclusive proof of who is the owner of a copyright work, but it does give rise to a rebutable presumption that what is deposed to is true. Quia Timet Injunctions 48.Quia timet injunctions may be applied for and granted before any act infringing the applicant’s rights has occurred, to prevent that happening. They are commonly pursued to prevent breach of patent rights. 49.However, there has to be established some prospect that there will be a breach; that there is a risk of a future injury justifying the immediate granting of an injunction. If there has been no infringement in the past, that is a factor which may weigh against the need for one. 50.As was said many years ago, in exercising its discretion, the court is required “to balance the magnitude of the evil against the chances of its occurrence”; see Earl of Ripon v Hobart (1834) 3 My & K 169 at p.176. And it is said in another case standing also the test of time, Fletcher v Benley (1885) 28 Ch D 688 at p.698:
Discussion 51.There are as I have earlier stated two issues. The first concerns the question of ownership of the copyright. 52.Mr Wong for Lee Yuen submits that in the absence of evidence from Susie McCaffrey, the alleged author of the sketches produced, in particular as to the timing of the sketches and just when (if at all) they were made available to Timmy Hui and Lee Yuen, there is an arguable defence that the concept emerged from Lee Yuen such that the drawing prepared and forwarded by Lee Yuen was the artistic work of which Lee Yuen is the owner. 53.I do not with respect agree. It seems quite clear to me from the history as it unfolded and is represented in the emails, and as well from Ms Stutz’s participation in events, that the idea came from Bonjour’s team and came into existence when Susie McCaffrey put pen to paper and drew her sketch. It is not possible that that was not sent to Lee Yuen or handed to Timmy Hui, at the meeting of 12 January. The working drawing that Lee Yuen holds out as original is not original at all. It derives from Susie’s sketch. 54.I conclude there is no arguable defence to the proposition that Susie’s employer, and then its successor in title, is the owner of the copyright. 55.What about the prospect of Lee Yuen infringing? 56.Mr Shipp for Meyer submitted that Lee Yuen’s applications to register the design in Hong Kong and the PRC were made without telling Bonjour. That the president had “reminded Lee Yuen to do so” was a bare assertion not backed by anything concrete; at any rate it is denied. Whilst Lee Yuen in pre-writ correspondence said it would revoke the Hong Kong registration, it has declined to do so in respect of the PRC registration. This represents a sufficient threat; there is no arguable defence to the need for the protection afforded by the quia timet injunction asked for. 57.I do not agree. All steps taken and words pronounced indicate that Lee Yuen will not infringe Meyer’s copyright. 58.It has revoked the Hong Kong registration, even as it asserted ownership of the copyright. Mr Chung under oath said that the PRC registration will lapse shortly; I accept that is enough to demonstrate there will be no renewal applied for. He has also said, under oath, that whilst Lee Yuen has received trade enquires from other customers about the Hot Chocolate Maker it has not entertained them. Further, Lee Yuen has never dealt in the product with any other customer and, as Mr Chung swears, has never had the intention of doing so with any party save Bonjour or Meyer or related companies. 59.I conclude that it has been amply demonstrated that there are triable issues on the granting of a quia timet injunction. The Orders 60.On the issue of ownership in the copyright there is to be judgment in favour of Meyer. 61.A number of orders were asked for in a draft order submitted. Some of these relate to the quia timet application which has failed at this stage. One concerns an affidavit asked for giving details of any other registration by Lee Yuen outside of Hong Kong. There is nothing to suggest there has been any; this will not be ordered. There is a further order requested being a transfer of the PRC registration. In view of its imminent demise that will not be made either. 62.What remains is the declaration of ownership in copyright that is asked for; that is granted. 63.Lee Yuen has unconditional leave to defend the application for an injunction. COSTS 64.These are nisi. The plaintiff has won its application for a declaration of ownership but the defendant has held off the remaining matters. 65.In the circumstances the plaintiff shall have its costs associated with establishing ownership in the copyright both in the action and this application. 66.The defendant shall have its costs of and related to its defence of the summary judgment application for the injunction, in any event.
Mr C Shipp, instructed by of Messrs Munros, for the Plaintiff Mr P Wong, instructed by Messrs Benny Kong & Peter Tang, for the Defendant | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment