Tinbo (Asia) Co Ltd v. China Aims Enterprises Ltd

HCA 111/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 111 OF 2006

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Before: Recorder A Chan, SC in Court

Dates of Hearing: 11-13, 17, 19 March 2008

Date of Judgment: 2 April 2008

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J U D G M E N T

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1.This case concerns products which are made from “soapberry” (called “無患子” in Chinese).  Soapberry is a fruit from a tree and is similar in appearance and size to a longan.  Soapberry contains a large amount of saponin and, as its name suggests, can be used directly as soap or in the making of other cleaning agents such as shampoo and cosmetics.  Apart from its use as a cleaning agent, soapberry is also known for its medicinal value which was acknowledged as early as the Ming Dynasty (recorded in “本草綱目”). 

2.In the 1960s, soapberry products became popular in Taiwan and they are now widely available there. 

3.The Plaintiff was established in 1998 and from then until 2002 it was primarily engaged in the internet business.  At the beginning of 2002, the Plaintiff wanted to expand its business.  In July that year, the Plaintiff was introduced to soapberry products by a Taiwanese manufacturer.  The products were used by some of the Plaintiff’s staff and the feedback was favourable.  Some market research was carried out and the Plaintiff found that no one knew about soapberry and soapberry products were not available in Hong Kong.  The Plaintiff then decided to introduce such products to Hong Kong.

4.I shall have to go into the details concerning the promotion of soapberry products by the Plaintiff.  However, before doing so, I need to say a few words about this action.  This action was commenced on 17 January 2006, in which the Plaintiff claims to have substantial goodwill in the words “無患子Soapberry” (“the suit mark”) that it uses as a mark in respect of its soapberry products.  The Defendant is being sued for passing off its soapberry goods as those of the Plaintiff by the use of the mark “無患子”. 

5.Very helpfully, Counsel from both sides have put their minds to narrowing down the disputes in this action.  I would adopt the formulation of Mr Wong, who appears for the Defendant, in respect of the issues as follows:

(a)	As of April 2004 (the time when the Defendant commenced marketing products containing soapberry), has the Plaintiff established that it has acquired substantial goodwill in the term “無患子Soapberry” in Hong Kong in respect of products containing such substance, such that the term was recognized by the public as a distinctive indicia specifically of the Plaintiff’s goods?
(b)	Was there any actionable misrepresentation caused by the Defendant in using the term “無患子” in respect of its products?
(c)	If both (a) and (b) are answered in the affirmative, whether the Plaintiff’s claim should nevertheless be dismissed on the ground that it does not come to court with “clean hands”.

6.Going back to the facts, the evidence concerning the Plaintiff’s sales and promotional activities in respect of its soapberry products up to April 2004 is not controversial.  Such evidence may be summarized as follows:

(a)	At the end of December 2002, the Plaintiff undertook the first promotional activity for its soapberry products at 沙田偉華廣場.  It was described as a small promotion;
(b)	In April 2003, the Plaintiff started selling soapberry products to 薰衣草專門店 and 維佩思on trial basis.  The result was better than expected;
(c)	At the end of 2003, the Plaintiff participated in two large scale exhibitions to promote its soapberry products – CosmoProf Asia 2003 and HK Mega Showcase 2003;
(d)	In February and March 2004, the Plaintiff’s soapberry products were exhibited at four pharmacies in Hong Kong;
(e)	From November 2003 up to March 2004, various advertisements were placed by the Plaintiff with newspapers and magazines in Hong Kong, including the Apple Daily and the Oriental Daily;
(f)	Up to April 2004, the Plaintiff had sold a total of 4,108 pieces of soapberry products to four trading entities – 750 pieces were supplied to “文化村(耆富倉)有限公司”; 2,024 pieces were supplied to Retailcorp Ltd; 1,261 pieces were supplied to “維佩思” and 43 pieces were supplied to “薰衣草專門店”.

7.Mr Wong submits that there is no evidence as to how many of the aforesaid products actually reached the general public by April 2004 and if they did not reach the public, the public could not recognise the suit mark as that of the Plaintiff.  In my view, whilst there is no such evidence the point is counter-balanced by the fact that there must have been a significant number of people who were exposed to the products, e.g., seeing them on display at a shop, but did not make any purchase. 

8.Mr Cheung, who appears for the Plaintiff, has provided this court with some figures on the sales revenue generated and promotion expenses incurred in respect of the Plaintiff’s soapberry products.  For the year 2003, those figures are respectively HK$580,000 and HK$340,000 and, for 2004, HK$700,000 and HK$520,000.  I have no reason to doubt these data, especially when Mr Wong has not expressed any disagreement in respect of the same.  However, the 2004 figures are obviously for the entire year and are therefore of limited assistance.

9.It can readily be seen that the Plaintiff has taken on quite a task in trying to establish its case on substantial goodwill in the suit mark.  Firstly, the suit mark is a descriptive term for a fruit.  Secondly, from the end of 2002 to April 2004 (a period of only 14 months), the volume of sale and the amount of promotional activities are not extensive. 

10.Mr Wong submits that a mark which is descriptive will only be protected if it can be proved to have acquired a secondary meaning, i.e., it has become distinctive of the plaintiff.  The onus of proving such a secondary meaning in the case of words which are commonly and properly used as descriptive words is an extremely heavy one.  Mr Wong relies heavily upon the authority of Cellular Clothing Co v Maxton & Murray [1899] AC 326 :-

“… where you are dealing with a name which is properly descriptive of the article the burden is very great to show that by reason of your using that name descriptive of the article you are selling, you are affecting to sell the goods of somebody else.” (per Earl of Halsbury LC at p.336)

“There is a vital distinction in cases of this class between invented or fancy words or names … and words or names which are simply descriptive of the article manufactured or sold …

A totally different principle must apply in the case of goods which are sold under a merely descriptive name.  If a person employing a word or term of well-known signification and in ordinary use … is yet able to acquire the right to appropriate a word or term in ordinary use in the English language to describe his goods, and to shut others out from the use of this descriptive term, he would really acquire a right much more valuable than either a patent or a trade-mark; for he and his successors in business would gain the exclusive right, not for a limited time as in the case of a patent, but for all time coming, to use the word as applicable to goods which others may be desirous of manufacturing and are entitled to manufacture and sell as much as he is.  That being so, it appears to me that the utmost difficulty should be put in the way of any one who seeks to adopt and use exclusively as his own a merely descriptive term.” (per Lord Shand at p.338-340)

“…a man who takes upon himself to prove that words, which are merely descriptive or expressive of the quality of the goods, have acquired the secondary sense to which I have referred, assumes a much greater burden – and, indeed, a burden which it is not impossible, but at the same time extremely difficult, to discharge – a much greater burden than that of a man who undertakes to prove the same thing of a word not significant and not descriptive, but what has been compendiously called a “fancy” word (per Lord Davey at p.343)

11.Mr Cheung does not take issue with Mr Wong on the law as stated above.  He, however, valiantly endeavours to make out a case of goodwill enjoyed by the Plaintiff in the suit mark as of April 2004 based on the evidence summarized above.  With respect, I am unable to agree with Mr Cheung.  Firstly, it is a fact that the volume of sale and the amount of promotional activities in question are not extensive.  Secondly, given the descriptive nature of the suit mark, commonsense dictates that it would take something out of the ordinary to establish in the mind of the public that the descriptive term is distinctive of the Plaintiff’s goods.  In my view, the Plaintiff’s entrepreneurship and its eagerness to protect its trade mark are to be respected, but I am unable to see how it can be said that by April 2004 the Plaintiff has established a goodwill in the suit mark.  I should say that in coming to my decision I have not overlooked the Plaintiff’s evidence that, according to its market research carried out in 2002, no one in Hong Kong knew about soapberry.  With respect, the research was based on enquiries made by the Plaintiff’s staff and it was not an extensive exercise.  In the premises, I am unable to place much weight on it. 

12.Having failed at this primary hurdle, the Plaintiff’s action must be dismissed.  I propose to deal briefly with the remaining two issues.  In respect of the second issue (see para. 5 above), the contention is whether there is any actionable misrepresentation on the part of the Defendant in describing its soapberry products by reference to “無患子”.  

13.I am inclined to find in favour of the Defendant on this issue for the following reasons:

(a)	I find that the use of the words “無患子” on the Defendant’s products (to be precise, the words are used on the labels attached to the front of the products) is descriptive and, given that there is no dispute that such products have a soapberry content, cannot constitute any misrepresentation.  On each of the labels, one can see a picture of some soapberries and the words “無患子” appearing next to the fruits.  Further, on each of the labels, there is a trade mark of either “三農” or “綺緣”.  In the premises, it is unlikely that the public would regard the words “無患子” as indicative of trade origin;
(b)	The Plaintiff’s own witness, Mr Chow Chun Hei (“PW1”), has accepted that other people in Hong Kong are entitled to call their products, which contain the substance soapberry, “無患子” products;
(c)	It is trite that where a trader adopts a descriptive or commonly used word as his mark or name, he must accept that some risk of confusion is inevitable (see Office Cleaning Services Ld. v Westminster Window & General Cleaners Ld. [1946] PRC 39 at 42-43);
(d)	In respect of the packaging of the products, there is a common feature between some of the Plaintiff’s products and some of the Defendant’s – a dried soapberry is contained in the packaging.  I find that the packaging feature is quite popular in Taiwan and adopted widely by different Taiwanese manufacturers.  The packaging of the Plaintiff’s goods simply came from its Taiwanese supplier and the same can be said in respect of the Defendant’s goods.  I see nothing sinister at all in that common feature.  It certainly cannot be said that the Defendant was in some way copying the packaging of the Plaintiff’s goods.

14.As regards the third issue, the Defendant seeks to attack the Plaintiff’s conduct concerning its use of the mark “®”alongside the suit mark.  It is the Defendant’s case that such conduct was deliberate and carried out with the knowledge that it had the effect of misleading the public into thinking that the suit mark had been registered as a trade mark when the registration of it had in fact been refused by the Registrar of Trade Marks.

15.Whilst I find some disturbing features in this aspect of the case, on balance, I am not inclined to accept the Defendant’s contention and bar the Plaintiff from relief had I found in favour of the Plaintiff on its passing off action against the Defendant.  There are two main reasons.  Firstly, the Defendant is making a serious challenge on the bona fide of the Plaintiff and I am not convinced on the evidence that the Plaintiff was acting with such a sinister motive.  It is possible that, as PW1 said, the Plaintiff was acting upon professional advice (which turns out to be erroneous).  Secondly, as Mr Wong has conceded, there is no clear authority on the refusal of relief by the court despite having accepted that a cause of action has been made out after trial.  I do not believe that this is a case where the court should explore the boundary of its discretion on this subject.

16.For these reasons, this action is dismissed.  I also make an order nisi that the costs of this action be to the Defendant to be taxed if not agreed.  Such order is to become absolute 14 days from today in the absence of any application for variation.  Last but not least, I am grateful to both Counsel for the assistance they have rendered in the course of this trial.

Mr Ivan Cheung, instructed by Messrs Francis Kong & Co., for the Plaintiff

Mr. Philip Wong, instructed by Messrs Benny Kong & Yeung, for the Defendant