Gold Source Jewellery Ltd v. Jewel Arts Ltd

HCA 2708/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2708 OF 2006

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BETWEEN

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Before : Deputy High Court Judge L. Chan in Chambers

Dates of Hearing : 9 and 21 March, 10 and 27 April, 23 August 2007

Date of Decision : 18 February 2008

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D E C I S I O N

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1.There are two summonses for determination. One is by the plaintiff for interlocutory relief which includes an interlocutory injunction.  The other is by the defendant for the discharge of an interlocutory injunction granted by Deputy Judge Muttrie on 8 December 2006.

2.The plaintiff is in the business of design, manufacture and sale of jewellery.  It trades in wholesale, retail and export of jewellery of its own design.  The defendant is also a jewellery designer and trader.  It also trades in wholesale and export of jewellery of its own design.

3.The plaintiff claims that the defendant has infringed its copyright in the design drawings of 24 rings.  It has obtained the interlocutory injunction from Deputy Judge Muttrie.  It’s inter parte summons is in effect for the continuation of this injunction.

The grant of the interlocutory injunction

4.The 1^st affirmation filed by the plaintiff was made by its general manager, Madam Suen.  She produced the design drawings for the 24 rings which she said were made by the plaintiff’s designers and former designers.  She also produced the photographs of the 24 rings which were made according to these drawings.  In addition, she also produced the invoices evidencing the first offers and first sales of these rings.  For the purpose of these proceedings, she marked the plaintiff’s rings from PA to PX.  She also marked the defendant’s 24 rings which were said to be infringements as DA to DX.  The defendant’s ring DA corresponds to the plaintiff’s ring PA and so on and so forth up to DX and PX.

5.On 19 to 23 September 2006, the plaintiff participated in the Hong Kong Jewellery and Watch Fair at the Hong Kong Convention Centre.  The defendant also had an exhibition booth there.  The plaintiff found that the defendant was offering for sale 4 rings which were identical/substantially similar to the plaintiff’s rings PA, PB, PD and PE.  A staff member of the plaintiff then purchased 5 rings from the defendant which included the 4 rings in question.  As I have mentioned above, these 4 rings bought from the defendant were marked DA, DB, DD and DE. 

6.The plaintiff then through a longstanding customer obtained from the defendant on about 28 September 2006 a proforma invoice.  By this proforma invoice, the defendant offered 28 rings at different prices to this customer.  The proforma invoice showed a clear frontal/aerial view of each of the 28 rings.  Amongst the 28 rings, the aerial views of 21 of them looked identical/substantially similar to the aerial views of 21 of the plaintiff’s rings.  These 21 rings were DA, DB and DF to DX.  Rings DC, DD and DE were not in the proforma invoice.

7.In October, 2006, the plaintiff checked the jewellery magazines and found that the defendant had advertised rings DA and DB in volume 2/2006 of Hong Kong Jewellery and ring DC in volume 3/2006 of the same magazine. 

8.The plaintiff then applied on 5 December 2006 for an interlocutory injunction to stop the defendant from infringing the 24 ring designs by sale of rings or otherwise.  The application went before Deputy High Court Judge Muttrie on 8 December 2006.  The defendant was not legally represented on that day.  One Mr Lam Chuk Pun, one of its two directors, appeared at the hearing.  Mr Yee, counsel for the plaintiff, asked for an interlocutory injunction immediately.  He showed the learned Judge rings DA, DB, DD and DE and made comparison with the plaintiff’s design drawings.  He also told the learned Judge that all the 24 rings of the defendant were identical/substantially similar to the corresponding ones of the plaintiff.  Mr Lam opposed the application on behalf of the defendant.  The defendant had not had any proper opportunity to file its affidavit evidence yet.  There was this dialogue between Mr Lam and the learned Judge:

“	COURT :	Yes.  Right, and you are Mr Lam and what do you want to say, Mr Lam?
	MR LAM :	I have all the documents with me now and I just received those documents yesterday, and I would seek for legal advice and show my legal representative those documents, and then I would discuss with my partner what to do.
	COURT :	Yes, but you see, looking at what Mr Yee says is your rings against the pictures produced by the plaintiff, I mean they look identical to me.  So I mean have you anything to say about that?
	MR LAM :	In business in this trade and we very often would refer to some magazines and to change those designs on those magazines for a little bit and to produce our own products.  Designs shown on some overseas magazines look very similar to one another also and we would also refer to those designs on those magazines to produce our own products.
	COURT :	So I mean leaving out all the rest of the verbiage, really, what they want you to do is to stop selling this stuff in the meantime pending the further hearing.  Are you prepared to undertake that or not”
	MR LAM :	No, I won’t.”

The learned Judge then referred to the principle in American Cyanamide Co. v Ethicon Ltd [1975] AC 396 and concluded as follows:

“	COURT :	Applying these principles, No. 1, there is clearly a serious question to be tried.  There may be a dispute on the fact as to whether there is actual infringement, but the rings look identical to me.  No. 2, I accept that damages would not be an adequate remedy for the plaintiff and that the defendant could be adequately compensated by the plaintiff’s undertaking as to damages.  The balance of convenience clearly favours the suspension in particular of the sales of the defendant’s product pending further order.
		I will grant an injunction in terms of paragraph 1 of the summons until further order and there will be directions in terms of those suggested by counsel, namely, that the defendant will have leave to file and serve affidavit evidence in opposition within 14 days.  The plaintiff has leave to file and serve affidavit evidence in reply within 14 days thereafter. No further affidavits or affirmations without leave.  Liberty to apply.  Costs reserved.”

The evidence for the continuation/discharge of the injunction

9.The defendant then filed an affirmation by Mr Lam on 5 February 2007 to oppose the plaintiff’s application and to discharge the injunction granted by the learned Judge.  This affirmation was prepared by solicitors and affirmed by Mr Lam on 5 February 2007.  That was nearly two months after the granting of the injunction, but the affirmation did not contain any defence to the plaintiff’s allegation of infringement of the 24 ring deigns.  Mr Lam said in the affirmation that after having received the papers of the plaintiff’s application, he on 6 December 2006 conferred with his fellow shareholder and director, Mr Damien Cheung on what to do.  They then had a conference with a solicitor on Thursday, 7 December, but the solicitor declined instructions as she did not have an intellectual property practice.  Mr Lam then appeared in court on the next day. 

10.Mr Lam further said that the defendant had sold rings of designs DB, DE, DS and DU on dates earlier than those of the plaintiff.  He also produced some copy invoices to support this assertion.  He said the defendant was in the business of trading jewellery and accessories including rings of its own design.  The injunction has greatly hindered the defendant in its frequent participation in various trade fairs in that it could not exhibit rings styles DA to DX to its customers.

11.The plaintiff then filed three affirmations by its former designers confirming the plaintiff’s copyright in 22 rings.  Ms Suen also made her 2^nd affirmation to correct a few factual errors.  All these affirmations were filed on 23 February 2007.  On 2 March 2007, the plaintiff filed one more affirmation by another former designer to confirm the copyright of the remaining 2 rings.

12.The defendant filed Mr Lam’s 2^nd affirmation on 23 February 2007.  He said there were several notable features of the jewellery business.  He said jewellery products and traders could be divided into high value, middle price and low price categories.  High value products were traded by internationally renowned merchants.  They were rare and expensive and had distinctive designs.  The high value traders were trendsetters.  The middle and low value range of products had their designs dictated by the general trend.  Their designs were less distinctive and, at times, not distinctive at all.  The price difference between different traders in these categories was most significantly related to different value of the precious stones used and has little or nothing to do with the design.  These traders were trend followers.  Furthermore, there were a vast number of different styles both new and old in the market.  Though the defendant started business in early 2003, he had already dealt with more than 800 different ring styles by February 2007. 

13.He then referred to the designs of the rings in question.  He said of the 24 rings, 23 of them revolve around a basic design principle wherein a primary stone was set in the centre of the ring with other elements designed around the centre setting.  He referred to this as the General Design Brief.  He said the outlook of each ring was largely dictated by the General Design Brief.  Therefore there were a few features; namely: the ring had to be circular to fit the finger of the wearer; there had to be a cup or mount in the middle to hold the primary precious stone; there had to be a minimum number of claws or prongs to form the cup or mount, smaller stones were often fixed around the primary stone or on the ring shank.  There were also other limitations on the shape of the primary stone.  However, despite the restrictions imposed by the General Design Brief, there were still room for many and numerous variations in each design and these variations distinguished the goods of different traders.  It was the minutiae of the variations on the General Design Brief that distinguished each particular ring.

14.He then dealt with the designs of the defendant’s rings.  For the first time, he said that the ring styles DA to DX were designed by his fellow director and shareholder, Damien Cheung with Cheung’s own labour, skill and judgment.  All copyrights in these designs belonged to the defendant.  He produced the design drawings and gave the dates of the creation of these designs.  For designs DB, DE, DS and DU, he asserted that they were created on dates earlier than those for PB, PE, PS and PU.  He also said that the dates of the defendant’s first offers of these four designs to its customers were earlier than the plaintiff’s.  He admitted that the remaining 20 rings were designed on dates later than those for the plaintiff’s corresponding rings.  He also produced a number of magazines and product catalogues that Cheung had purportedly referred to when designing those rings.  He opined that the variations between the rings were small and Cheung had told him that Cheung had not referred to the plaintiff’s rings when designing the defendant’s rings.  He then produced 24 actual sample rings of the defendant and compared them with the photographs of the plaintiff’s corresponding rings and noted their differences.

15.The plaintiff then filed Ms Suen’s 3^rd affirmation on 5 March 2007 to reply to Mr Lam’s 2nd affirmation.  She said Hong Kong was the 3^rd biggest jewellery exporting territory in the world because of the excellence of design and craftsmanship.  She produced various articles published by the Hong Kong Jewellery Manufacturer’s Association which underscored the reputation of designs of Hong Kong Jewellery.  There were also jewellery design competitions organized by the Association together with the Hong Kong Government, the Trade Development Council and other jewellery traders associations.  There were also jewellery design courses of different levels organized by the School of Continuing Education of the Hong Kong Baptist University and the Jewellery Industry Training Centre of the Hong Kong Institute of Vocational Education.

16.She agreed that there could be trends of designs, but disputed the trend setting theory put forward by Mr Lam.  She said even within a trend, there could be numerous original designs, trend followers need not copy the distinctive features of the trendsetters.  She also disagreed that jewellery products of middle or low price traders were less distinctive or even indistinct or insignificant.  She rejected Mr Lam’s General Design Brief or that the plaintiff’s 24 ring styles were of art deco design.  She also disputed Mr Lam’s assertion that the Defendant had sold rings styles DB, DE, DS and DU on dates earlier than those of PB, PE, PS and PU. 

17.She said the bulk of the plaintiff’s business was for export to the USA, Japan and other countries.  Regarding rings, the plaintiff mainly designed, manufactured and exported ring mounting or semi-mounting rings.  The plaintiff was the leader of semi-mounting rings in the USA market.  The plaintiff also took part in various trade fairs in various countries around the world. 

18.Regarding the 24 design drawings produced by Mr Lam, she disputed their originality.  She disputed the authenticity of the defendant’s documents produced to support its case of independent creation.  She also identified style PD from the magazines allegedly consulted by Mr Damien Cheung in designing DA to DX.  

19.She had examined at the defendant’s solicitors’ office the 24 ring actual samples exhibited by Mr Lam.  She said the defendant’s ring samples DF, DH, DI, DJ, DK, DM, DN, DR, DS, DT, DU, DV, DW and DX were different from the supposedly corresponding ring styles shown in the defendant’s proforma invoice.  (She later added ring sample DQ to this series in her 5^th affirmation filed on 3 April 2007).  She reaffirmed that the 21 ring styles on the defendant’s proforma invoice were infringing copies as the specifications of most of them in relation to the number of small stones required were also the same as the plaintiff’s corresponding ones.  She said such could not have been a co-incidence.  She raised concern on the quality and craftsmanship of the defendant’s ring mountings as the defendant was selling them as those of the plaintiff’s but at lower prices.

20.The defendant then filed an affirmation by Mr Damien Cheung and an affirmation by one Mr Cheng on 5 March 2007.  Mr Damien Cheung confirmed that he had created the defendant’s ring designs.  He also referred to some ring designs Mr Lam obtained from the internet which he said were similar to the plaintiff’s ring designs.  He compared the ring designs in the internet with four of the plaintiff’s rings in this exercise. 

21.Mr Cheng was a diamond dealer.  He had inspected the plaintiff’s ring samples which were produced at the defendant’s request and compared them with the defendant’s ring samples.  These rings all had diamonds set in them.  He in particular compared the quality and cutting of the diamonds used in the making of the rings.  His conclusion was that each and every one of the defendant’s rings had stones of better clarity and colour than those of the plaintiff’s rings.  The defendant’s rings also had better workmanship than the plaintiff’s.  (I however note that most of the prices of the defendant’s rings without the precious stones as quoted in the proforma invoice were lower than the prices charged by the plaintiff for the plaintiff’s corresponding rings.)

22.The plaintiff then filed Ms Suen’s 4^th affirmation on 7 March 2007.  She gave the reason for the minor differences between the plaintiff’s design drawings and its finished products.  She said it could have been because of modifications made to the design after a dummy has been produced from the design.  Another cause for difference was the application of the millegraining technique to the finished products.  Regarding the defendant’s comparison of ring styles obtained from the internet with the plaintiff’s designs, she disagreed that they were highly similar to the plaintiff’s except one ring mounting shown on the internet which was in fact a design of the plaintiff. 

23.The defendant also filed a 2^nd affirmation of Mr Damien Cheung and a 3^rd affirmation of Mr Lam on 19 March 2007.  Mr Damien Cheung said he obtained a diploma from the Lee Wai Lee Technical Institute for jewellery and toy design after attending a 2-year course there.  He then worked as a jewellery designer for over 10 years before starting the business of the defendant in 2002 with Lam.  He used to spend a large part of his time designing jewellery for the defendant.  He would create several hundreds of designs of jewellery every month and choose about 80 to 100 of them for sample making.  These samples would be incorporated as part of the defendant’s products.  The actual product would be made upon receipt of an order.  Mr Lam in his 3^rd affirmation mainly dealt with the finance of the defendant and his own finance.

24.The plaintiff filed the 5^th affirmation of Ms Suen on 3 April 2007 and three 2nd affirmations by three former designers in late May 2007.  Ms Suen referred to the invoices and other documents produced by Mr Lam and explained why these appeared suspicious and not authentic.  The three former designers again referred to the ring styles they created and confirmed that the defendant had copied them. 

25.The defendant then filed the 4^th affirmation of Mr Damien Cheung on 11 May 2006.  Mr Cheung said the features of the plaintiff’s 24 rings were common in the trade.  He had been inspired by the ring designs published in trade magazines and catalogues, but he had not copied any of them when designing the defendant’s 24 rings. 

26.The various affirmations of the parties also contained other materials.  There were also criticisms by the plaintiff on some other aspects of the defendant’s case that I have not referred to as I do not think they are significant for the purpose of this decision.

Submissions

27.Leading counsel for the plaintiff submitted that there was an overwhelming degree of objective similarity between the plaintiff’s 24 ring styles and the defendant’s corresponding ones.  The similarity between the rings and hence their drawings could be detected visually.  The differences that were identified by Mr Lam in his affirmation were only due to slight modifications.  Of the 24 actual ring samples produced by the defendant, 15 of them differed from the corresponding ones in the defendant’s proforma invoice.  Even the specifications in the proforma invoice for most of the defendant’s rings in relation to the number of small stones required were the same as the plaintiff’s corresponding ones.  Counsel thus submitted that there was a serious question to be tried on the subsistence of copyright in the design drawings of the 24 rings, the plaintiff’s ownership of the copyright and the defendant’s infringement of the same.

28.On damages, counsel submitted that the plaintiff’s loss was not quantifiable or cannot be adequately compensated by damages.  What was at stake was the plaintiff’s exclusivity.  I am referred to Fabrique Ebel Société Anonyme v Remex Electronics Ltd, HCA 7982 of 1983 at pp. 33-35.

29.The defendant does not dispute that there is a serious question to be tried in respect of the subsistence of the copyright, the plaintiff’s ownership of the same and the defendant’s infringement.  Despite this concession, leading counsel for the defendant argued that there was confusion about the drawings exhibited by the plaintiff and the model numbers applied to the plaintiff’s ring designs.  I think these matters have now been clarified by Ms Suen in her affirmations. 

30.The defendant also argued that it was incumbent upon the plaintiff to prove that the defendant had access to their works, mere similarity between the rings did not prove access or opportunity for the defendant to copy.  Counsel cited para. 4.63 of The Modern Law of Copyright and Designs, 3^rd edition in support of this argument.  I think it is instructive to look at this paragraph in order to understand the argument:

“	Derivation
	4.63	As outlined earlier, even if two works objectively resemble each other sufficiently closely to satisfy the requirements of the law of infringement discussed above, the claimant must still prove that the defendant got there by plagiarism, and not independently.  By this we mean that he copied all of the features judged to be essential to constitute the minimum of whatever is the required degree of objective resemblance.  This is a matter for evidence, although if no other cogent evidence is led, the mere resemblance of the works coupled with opportunity for access may be capable of affording it. … However, each case depends on its circumstances and, as pointed out in the preceding chapter, where two works resemble each other objectively there are only five possible explanations: (a) that the defendant copied the claimant’s work; (b) the converse; (c) both were derived from some common source; (d) sheer coincidence; and (e) the nature of the subject matter was such as to dictate the result; or a mixture of some of these … Whether there has been plagiarism is often established by the presence of otherwise inexplicable coincidences, often of features or points trivial in themselves, such as mistakes.  In some circumstances it is advisable to introduce minor errors on purpose to catch out plagiarists.”

A careful reading of this paragraph shows that what the authors were merely emphasising the importance of evidence of plagiarism.  Such evidence may be in the form of an opportunity for access to the original work.  It may also be inexplicable coincidences.

31.Counsel also argued that the plaintiff’s 24 rings did not appear to have original features and were products of the General Design Brief referred to by Mr Lam in his affirmation.  Hence, it was argued that the plaintiff did not have a strong case. 

32.Counsel also asserted that the defendant had a strong case of independent design.  Hence, it was further submitted that the plaintiff could not rely on the merits of its case to tip the balance of convenience in its favour.

33.Counsel then argued that Deputy Judge Muttrie should not have granted the interlocutory injunction as the balance of convenience lied in favour of refusing it. 

34.In any event, counsel submitted that the plaintiff had not shown that damages would not be an adequate remedy.  It was also argued that the defendant’s ring mountings were of better quality than the plaintiff’s and hence no damage would be done to the plaintiff even if customers should mistakenly take the defendant’s rings as the plaintiff’s.  It was further submitted that the rings of the plaintiff and of the defendant were of generic nature and end customers would very rarely be able to distinguish the products of different manufacturers.  It was also argued that the plaintiff had numerous ring designs and 24 similar ones from another manufacturer could only produce a small impact.  The net equity value of Mr Lam’s flat was also referred to as the asset sufficient to cover the plaintiff’s loss.

35.On the other hand, counsel argued that the defendant’s business was suffering the adverse consequence of the injunction.  It was unable to showcase the 24 ring styles in trade fairs.  Owing to the injunction, the defendant’s business practice had also been doubted by customers and its reputation tarnished.  Reference was also made to Mr Lam’s 2^nd affirmation that some customers of the defendant had expressed dissatisfaction at the defendant’s inability to accept orders for some of the rings in question and would cancel entire intended re-orders which included other items.  Counsel also submitted that the defendant had dealt with these rings for a substantial period of time and the status quo should have been preserved.

36.I, however, note that Mr Lam has said that the defendant had between early 2003 and February 2007 dealt with more than 800 ring styles.  Mr Cheung has also said that he used to create several hundred new jewellery designs every month of which 80 to 100 would be used to produce samples for sale.  These 24 rings would therefore constitute less than 3% of the ring styles in the defendant’s current product catalogue not to mention the new designs to come.

37.Leading counsel for the plaintiff also submitted that if the defence of independent design by Damien Cheung was genuine, why was this not raised until the filing of Mr Lam’s 2^nd affirmation on 23 February 2007?  Counsel also referred to the affirmation of the defendant’s solicitor, Mr Yeung which referred to the legal advice given to the defendant on the available lines of defence.  The legal advice did not include the defence of independent design.  When Mr Lam appeared before Deputy Judge Muttrie on 8 December 2006, he also did not raise this line of defence.  The defendant kept this line of defence and Mr Cheung’s alleged design drawings and the supporting documents very close to its chest and only disclosed them on 23 February 2007.  But there was no reason for the defendant to have kept this defence to its chest and not to reveal it at the first available opportunity.  Counsel also emphasised that of the 24 actual ring samples produced by the defendant, 15 of them differed from the styles as depicted in the proforma invoice.

38.Counsel also submitted that regardless of the defendant’s financial position, the loss suffered by the plaintiff as a result of the defendant’s infringing activities is not quantifiable and cannot be adequately compensated by damages.  Hence an injunction should be granted.  I am also referred to Mondaress Ltd v Bourne and Hollingsowrth & Anr [1981] FSR 118 at 122-123.

39.Leading counsel for the defendant in the 2nd set of written submissions further argued that unless the plaintiff could show a substantial sector of the relevant market would be able to recognize the plaintiff’s design as unique (as in the case of Fabrique Ebel), its case of loss of exclusivity did not even begin to stand.  Counsel also argued that some of the defendant’s rings had been on the market for sometime and the plaintiff took no notice of it and no customer raised with plaintiff.  It was also argued that damages were an adequate remedy for the plaintiff.  Counsel also reiterated that there were the clear defences of “no substantial reproduction” and “independent design” with serious issues to be tried.

40.In the 3^rd set of written submissions, counsel also referred to the plaintiff’s allegation that 15 of the sample rings were different from the corresponding ones in the proforma invoice.  Counsel, however, pointed out that the plaintiff did not make the same allegations regarding sample rings DG, DL, DO and DP, but the sides of these 4 rings were different from the plaintiff’s corresponding ones.  Counsel thus argued that for the defendant’s 19 ring styles, which were only shown in their aerial views in the proforma invoice, there was no evidence to show that if viewed from different dimensions, they would be substantially similar to those of the plaintiff.  Counsel thus said that the plaintiff’s case on these 19 rings was just speculative.

41.The plaintiff on 23 August 2007 filed another set of submissions to deal with all the defendant’s arguments.  The plaintiff reiterated its overwhelming case.  It also dealt with the weakness of the defendant’s case of independent design by reason of the delay in making it out and the delay in producing the purported supporting documents, some of which had unsatisfactory features which had to be explained by the defendant.

42.For the 15 sample rings which differed from the corresponding ones in the proforma invoice, they obviously would also be different from the plaintiff’s corresponding rings.  However, the defendant did not provide any explanation for the difference save counsel’s suggestion that the moulds might have been damaged.  There was the hint that the defendant made these 15 rings different from the plaintiff’s rings so as to argue that the corresponding 15 ring designs in the proforma invoice were also different from the plaintiff’s.

43.The plaintiff’s submissions also highlighted its evidence of exclusivity and the damage to the exclusivity of its 3,000 odd designs if any particular design should found to be non-exclusive.  Counsel submitted that jewellery designs are purely for aesthetic purpose and exclusivity of design is of paramount importance.  Furthermore, the fact that the defendant was infringing the plaintiff’s ring designs showed that these designs were still of value and popular.  On the price comparison, the plaintiff used the price in its invoices and the defendant’s price in the proforma invoice.  Such comparison was reliable and showed that the defendant’s rings were priced below those of the plaintiff’s.  The comparison created concern for the plaintiff.  The submissions also referred to the defendant’s evidence to demonstrate that the defendant would not suffer much under the injunction.

Analysis and decision on the plaintiff’s application for injunction

44.The defendant has conceded that there is a serious question to be tried on the subsistence of copyright in the plaintiff’s 24 ring designs, the plaintiff’s ownership of the copyright and the defendant’s infringement of such right.  Despite the concession, the defendant argued that the plaintiff’s case was not a strong one.  Mr Lam of the defendant alleged that the rings in question were all governed by a General Design Brief.  However, each of the plaintiff’s 24 rings has a different appearance.  This certainly lends support to the claim of innovation and creativity.

45.On the question of infringement, the plaintiff’s case on copying by the defendant is indeed overwhelming.  The defendant has divided the plaintiff’s rings into two groups with rings PA, PB, PC, PD and PE in group 1 and the other 19 rings in group 2.  For PA, PB, PD and PE, the plaintiff bought the corresponding rings DA, DB, DD and DE from the defendant.  For ring PC, the defendant has advertised its photograph in a jewellery magazine.  By visual comparison of the plaintiff’s design drawings for these 5 ring styles and the rings manufactured therefrom against the 4 rings sold by the defendant to the plaintiff and the photograph of ring DC in the magazine, it can be seen that these 5 rings of the defendant look identical/substantially similar to the plaintiff’s corresponding ones in group 1.

46.The defendant’s case is that Mr Cheung created the designs in DA to DE independently by himself and without copying from PA to PE.  Despite the limitation by the so-called General Design Brief, rings PA to PE all looked different from one another.  In fact, all 24 rings exhibit some differences from one another.  This shows the existence of a lot of room for creating differences.  Therefore, the chance of two designs being created independently but ended up with the same/substantially similar appearance is not great.  The creativity of Mr Cheung should not have been constrained by the General Design Brief so much so that he could only have begotten ring designs which are the same as or substantially similar to the plaintiff’s. 

47.It is not impossible that the General Design Brief, if any, might have driven Mr Cheung to create 1 or 2 designs which are the same as or substantially similar to the plaintiff’s.  Coincidence may be the answer.  However, the possibility for him to have independently come to 5 designs which are identical/substantially similar to those of the plaintiff is indeed extremely remote.  The Plaintiff’s case of copying for the 5 rings in group 1 is indeed overwhelming. 

48.Turning to the 19 styles in group 2, the aerial views of the defendant’s styles as shown in the proforma invoice are again identical/substantially similar to the corresponding ones of the plaintiff.  It is the defendant’s case that the sides of these 19 styles may all be different from the corresponding ones of the plaintiff and such differences make them independent designs.  Even if the defendant’s case should be accepted, by the same analysis as applied to the 5 rings in group 1, one can see that it is very unlikely for Mr Cheung to have come to 19 aerial view designs independently but which are identical/substantially similar to those of the plaintiff, whilst the sides all look different.

49.I also note that the defendant regarded it sufficient to show its customer only the aerial view of the designs as this is the only view of the 28 rings shown in the proforma invoice.  This coupled with the fact that 15 of the defendant’s sample rings are different from their corresponding designs in the proforma invoice further hints at the similarity between the designs in the proforma invoice and the plaintiff’s corresponding ones.  Otherwise, why did the defendant not produce sample rings from the designs shown in the proforma invoice faithfully?

50.I note the defendant’s reliance on the case of Natuzzi Spa v De Cora Ltd, HCA 1702/2001 and its submission that the court should not jump to the conclusion of copying simply by comparing the commercial products when there are a lot of common features employed in the designs.  However, despite these common features, the plaintiff has turn out no less than 24 rings, each of which has some distinct features.  There are also many other different ring designs which have been shown in the various trade magazines and product catalogues produced by the defendant.  If the plaintiff and those traders whose products have been exhibited could produce designs with different features, I see no reason why Mr Cheung should have been forced by his General Design Brief to the same 24 styles of the plaintiffs or the same 5 styles in group 1 and the same aerial views in group 2.  I do not overlook the defendant’s allegation that Mr Cheung produces several hundred new designs every month.  This allegation does not move me from the conclusion drawn from the above analysis.  I think there must be a point where technicality has to give way to common sense.  The plaintiff’s case against the defendant for copying is indeed overwhelming despite the absence of evidence of opportunity for or access by the defendant to copy these 24 styles.  The mathematical probability of coincidence is rather remote. 

51.The defence of independent creation is further weakened by its belated appearance.  If the defendant’s 24 ring styles were indeed created independently by Mr Cheung, Mr Lam would have known about it.  The two of them had a conference with a solicitor the evening before the hearing before Deputy Judge Muttrie.  This defence, if true, should have been brought out and discussed in the conference.  When Mr Lam appeared before the Deputy Judge in the next morning, he should also have revealed it as a ground for opposing the injunction.  But he did not.  This ground of defence also did not feature in the legal advice by the defendant’s present lawyers.

52.In the premises, I am driven to the view that the defendant’s case of independent design of its 24 rings is not a strong case at all.  If the plaintiff can prove its case on the subsistence and ownership of copyright, the issue of infringement by the defendant should not appear to be a difficult one.  I say this without the need to consider the alleged unsatisfactory documentation produced by the defendant in support of this defence as it is not my function to resolve disputed facts.  I also note that the defendant has provided purported explanations to the plaintiff’s allegations to these documents.  I also have not overlooked the defendant’s allegations that four of its ring designs were created earlier than the corresponding ones of the plaintiff.  This allegation is supported by purported invoices issued by the defendant to its customers.  However, I do not think these invoices coupled with the defendant’s design drawings can improve the defendant’s odds in the independent design of the 5 rings in group 1 and the 19 aerial views in group 2.

53.I now come to the question of adequacy of damages for the plaintiff.  The plaintiff’s evidence says that its jewellery products were designed by its designers or freelance designers for it.  It positions itself as a designer of innovative jewellery and has enjoyed commercial success.  Its net profit for 2006 was HK$9 million.  It is the market leader of semi-mounting rings.

54.It advertised its products in trade magazines and participated in many trade fairs.  It has received complaints from customers about availability of the same ring design on the market.  80% of the plaintiff’s business was with wholesalers.  They are small in number when compared with the retail public and they are more likely to identify exclusivity.  The defendant’s copying activity can jeopardize the plaintiff’s exclusivity and thus jeopardize the plaintiff’s reputation as an innovative jewellery designer.

55.The ring styles in question, though created a few years ago, are still of value and popularity as they are still being dealt with by the defendant.  The price comparison also shows that the defendant’s rings were priced lower than the corresponding ones of the plaintiff.  This would of course raise concern of quality of the rings sold by the defendant in the market (and not those produced by the defendant for comparison in this application).

56.The defendant on the other hand has given evidence that the designs of middle and low price products are trend followers and indistinct.  The defendant has more than 800 ring designs in its catalogue.  Mr Cheung also creates several hundreds of new designs of jewellery every month and would select 80 to 100 of them for inclusion in its product range.  The 24 styles in question only constitute less than 3% of all the defendant’s available ring styles. 

57.The plaintiff thus submitted and I agree that there is no reason why the defendant’s customers would insist on particular designs of the defendant.  There was an e-mail from a customer of the defendant dated 19 December 2006 which complained about the unavailability of 4 ring styles and threatened to cancel the entire order of 18 designs.  But that e-mail was not even produced in the 1^st affirmation of Mr Lam.  The attitude of the customer also did not appear to be reasonable.

58.The defendant also complained about the stigma created by the injunction.  I agree with the plaintiff that the mere existence of the action would create the stigma though to a less extent.  Furthermore, the stigma as caused by the injunction would also not be extensive as less than 3% of the defendant’s ring designs are affected.

59.If the defendant is right that the plaintiff’s 24 ring styles are mere indistinct trend followers and have no copyright in them, the defendant should not suffer much in not being able to use them.  Mr Cheung should have no difficulty to create other trend followers to take their place.  If however these are distinct designs that enjoy copyright protection, then the defendant should not be allowed to use them at all.

60.In the premises, the defendant would not suffer much because of the unavailability of these 24 ring styles.  Damages would surely be an adequate remedy for the defendant.  There is thus no question of the balance of convenience.

61.The defendant also complained that the plaintiff was guilty of substantial delay in making the application.  The plaintiff first discovered the defendant’s infringement in a trade fair in the later part of September 2006.  The application was made in early December 2006.  No doubt, it could have been made with more haste.  However, bearing in mind the many styles involved and the documentation to be prepared, I do not think the plaintiff was guilty of substantial delay.

62.I therefore grant the plaintiff the interim injunction as sought in the inter partes summons with modification as shown in a set of minutes of order given by the plaintiff to me on 23 August 2007.  The modifications are mainly to exclude from the injunction the 15 actual ring samples of the defendant which were different from the corresponding styles in the proforma invoice.  

63.The defendant also objected to downstream discovery at this stage.  However, I accept the plaintiff’s submissions that section 109 of the Copyright Ordinance allows such relief.  I therefore make an order in terms of paragraphs 2 and 3 of the minutes of order which requires the defendant to deliver up all rings, dies, tools and moulds etc. and to provide information of its suppliers and customers.  I also make a costs order nisi that the costs of occasioned by this application be the plaintiff’s costs in the cause.

Discharge of Interim Injunction Granted on 8 December 2006

64.The parties agree that I have jurisdiction to hear this application despite the injunction was granted after the court had heard the defendant’s objections.  I am referred to AIG (Asia) Direct Investment Fund Ltd & Ors v Ngai Wai Lun William & Ors, CACV 272 of 1998 in which Hunter and Partners v Wellings and Partners [1987] FSR 83 was cited with approval by Godfrey JA.

65.Though the application before Deputy Judge Muttrie was made inter partes, the hearing was not much different from one made ex parte with notice to the defendant.  The reason being that the defendant had not been given a proper opportunity to file its evidence.  The papers were served on the defendant on 5 December and the hearing took place in the morning of 8 December.

66.The 1^st point taken by the defendant was the lack of urgency on 8 December and the plaintiff should not have asked the court to grant the injunction before the defendant had a proper chance to file its evidence.  This point appeared to have merit particularly when the plaintiff had taken more two months to prepare its case. 

67.The 2^nd point taken by the defendant is material non-disclosure.  The 1^st issue under this heading is the plaintiff’s failure to advise the learned Judge that there was no evidence to demonstrate urgency or irreparable harm.  This is to rely on the lack of urgency again but under a different heading.

68.Though Ms Suen has said in her affirmation that the defendant should be enjoined as soon as possible, this application was not made ex parte.  The plaintiff had also not given notice to the defendant that it would ask for the grant of the injunction on 8 December.  This inter partes application did not appear to be peculiar.  Though counsel did say to the learned Judge that the injunction was to prevent irreparable loss and damage to the plaintiff which was difficult to assess and the defendant should not be allowed to continue with the dishonest copying activity for any longer, I am sure the learned Judge was fully aware that it was not an urgent application.  It in fact came up on the usual summons day. 

69.I think the judge was simply impressed by the overwhelming case of copying by the defendant.  Mr Lam was given a chance to say why the defendant should not be enjoined from such activity, but he did not say anything of substance.  He did not even hint at the defence of independent design.  What he said amounted only to a case of copying with modification though he did not admit of having copied from the plaintiff.  It was therefore reasonable for the learned Judge facing this situation to have granted the injunction there and then despite the evidence of the defendant had yet to be filed.  I also do not think there was any material non-disclosure on urgency.

70.The 2^nd attack of material non-disclosure was the alleged failure of the plaintiff’s counsel to advise the learned Judge that the plaintiff had only purchased 4 rings from the defendant and was not in a position to demonstrate that 19 other rings were all identical.  The plaintiff’s skeleton submission before the learned Judge referred to 4 rings having been purchased from the defendant and 21 rings were later offered by the defendant through its proforma invoice sent by e-mail.  Leading counsel for the defendant explained this point in the hearing that the plaintiff’s counsel should have told the learned Judge that for the 19 rings which featured in the proforma invoice only, each of them was only shown in a 2 dimensional picture and without any 3 dimensional presentation.  I do not think this a valid ground.  If the aerial views of 19 (or 21 including DA and DB) rings on the proforma invoice should appear the same or substantially the same as the aerial views of the plaintiff’s corresponding ones, common sense would conclude an overwhelming case of copying of the ring designs.  One could hardly imagine that the copying would be limited to the aerial views whilst independent creativity would be applied by the defendant to the sides of the rings (which were not even shown in the proforma invoice for the customer).  The plaintiff cannot be blamed for not disclosing to the Judge something which was beyond imagination.

71.The next attack of material non-disclosure was the failure of the plaintiff’s counsel to tell the learned Judge that the defendant’s goods would not flood the market as they were purchased in small quantities.  I again do not accept the validity of this attack.  The designs in question were of jewellery products, not cheap plastic toys.  The Deputy Judge was fully aware of this.  They were obviously traded in small quantities.  The Deputy Judge enjoined the defendant because of the extensive copying, not because of the flooding of the market.  The plaintiff also did not say that there would be flooding.

72.In the normal case, it is no doubt unsatisfactory to grant an injunction pursuant to an inter parties application butbefore the defendant is given a proper chance to file its evidence.  However, this case is not a normal one.  The evidence of copying by the defendant is overwhelming.  The defendant’s representative was invited to state the grounds of opposition, but no proper ground was given.  The exceptional facts in this case justified the grant of the injunction.  I therefore dismiss the defendant’s application to discharge.  I also make an order nisi that the defendant do pay the plaintiff the costs of this application.

Mr Andrew Liao, SC and Mr Kent Yee, instructed by Messrs Alfred Lam, Keung & Ko, for the Plaintiff

Ms Winnie Tam, SC and Ms Rachel Lam, instructed by Messrs Benny Kong and Peter Tang, for the Defendant