Iwan Dieter Ljubojevic v. Décor Trading Co Ltd
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DCCJ2143/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2143 OF 2007 ----------------------
-------------------- Coram : Deputy District Judge K. Lo (open to public) Dates of Hearing : 2nd November 2007 and 11th February 2008 Date of Handing Down Judgment : 25th June 2008 ---------------------- J U D G M E N T ---------------------- Background 1.This is an application by the Plaintiff for summary judgment against the Defendant for payment of US$38,623.72 being allegedly licence fee due and payable from the Defendant under a licence agreement between the Plaintiff as licensor and the Defendant as licensee concerning industrial designs of the Plaintiff or in the alternative damages for unauthorized use and exploitation of these industrial designs of the Plaintiff, interest and costs. 2.It is not in dispute that during the period from 5 October 2004 to 9 January 2006, the Defendant had paid to Plaintiff 12 payments totalling US$176,195.51. 3.Plaintiff said he had invented a design of part of the lamp known as ‘the Tube’ or “Tube Light’ (“the Registered Design”) and had registered the same with the German Register for Industrial Designs Rights at DPMA (German Industrial Design Right) and the office for Harmonization in the internal market (Trade marks and Designs) (OAMI) (European Industrial Design Right). 4.The Plaintiff also said he had invented industrial designs known as “Ribbon Garland’ and ‘Ribbon Lights’ (“the Unregistered Designs”). Issues 1. Was there a licence agreement between the parties in relation to the use of the Registered Design and/or Unregistered Designs? 2. Does the Plaintiff have enforceable right to use and exploit the Registered Design and Unregistered Designs? 3. Does the dispute on ‘Applicable Laws and Jurisdiction’ raise a triable issue? 1. Was there a licence agreement between the parties in relation to the Registered and/or Unregistered Designs? 5.The Plaintiff pleaded that in January 2004, it was agreed between the Plaintiff and the Defendant, inter alia, that the Plaintiff licensed the Defendant to use and exploit the Registered and Unregistered Designs and to sell and import articles manufactured by making use of these Registered and Unregistered Designs (“Articles”) in consideration of payment by the Defendant to the Plaintiff and/or the assignees of the rights of the Registered and Unregistered Designs royalties calculated by reference to the formula as follows (“the Royalties”):- Number of Articles sold x US$1.5 per unit 6.The Registered Design i.e. “Tube Lights” concerned the production, possession, offering to sell, advertisement, import and exports of articles of decoration lighting Articles No. X159936669, X159936670, X159936671 and X159936672 whereas the Unregistered Designs i.e. “Ribbon Garland” and “Ribbon Lights” concerned Articles X381940208 and X381940209. 7.It was submitted by the Plaintiff that the Defendant procured the manufacturing and sale of the said articles (“Articles”) using the Registered and Unregistered Designs. 8.It was pleaded by the Plaintiff also that the aforesaid agreement (the “Licensing Agreement”) between the Plaintiff and the Defendant was validly entered into and enforceable pursuant to the German Law, that it was made orally, and/or alternatively partly orally or partly by conduct between the Plaintiff and the Defendant. 9.In so far as it was made orally, the Plaintiff said the Licensing Agreement was made in meetings held in January 2004 in Germany between, among others, Mr. Luebbermann ( “Luebbermann”)acting on behalf of the Defendant and the Plaintiff himself. 10.It was further pleaded that alternatively, in so far as it was made by conduct, the conduct consisted of and was to be inferred from the conduct of the Defendant making 12 payments between 5 October 2004 to 5 January 006 totalling US$176,195.51 to the Plaintiff. 11.The Plaintiff further related that the Defendant had pursuant to the Licensing Agreement, made use of the Registered and Unregistered Designs directly or indirectly and manufactured, produced and sold the Articles to a German company “Otto Versand”. 12.In addition, the Plaintiff emphasized that the Defendant had on numerous occasions acknowledged expressly and openly his liability to pay the Plaintiff royalties due, payable and outstanding from them since January 2006. 13.The Plaintiff referred to a letter from the Defendant to the Plaintiff’s German lawyer, Messrs. Dielmann’s & Schonberger dated 17 February 2006, wherein the Defendant agreed to pay outstanding balance of royalties net of withholding tax. 14.The letter says that:-
15.In this letter, the Defendant imposed a condition to such payment that the Plaintiff shall provide documentation to show he had enforceable copyright covering the “Tube Light” and “Ribbon Garland”. 16.There was attached to this letter “Summary of payment to Mr. Ljubojevic setting out payments made and payment outstanding to the Plaintiff. 17.Again in letter dated 12 May 2006 from the Defendant to the Plaintiff’s said German lawyer, the Defendant insisted on, inter alia, the Plaintiff providing the aforesaid documentation before they made the payments. The Defendant said “we will pay the amount owing when the action is taken in accordance with point 2 (a) and (b) of our letter of 17 February 2006.” 18.Further, in letter from the Defendant to the Plaintiff’s Hong Kong lawyer, Messrs. F. Zimmern & Co. dated 15 September 2006, the Defendant admitted, subject to verification of registered design covering items X381940208 and X381940209 that the sum of US$26,290.05 was owing to the Plaintiff and that the said sum was net of withholding tax of US$12,333.67. There was also annexed to this letter Schedule (1) setting out how the sum was arrived at. 19.Moreover, in letter dated 25 September 2006 from the Defendant to the Plaintiff’s Solicitors, Messrs. F.Zimmern & Co., the Defendant again acknowledged outstanding payment due to the Plaintiff. 20.The Defendant in the letter insisted on the Plaintiff providing them with confirmation of his ownership of a registered design covering the Ribbon Garland. In the event that the required confirmation was provided, the Defendant said payment could be effected accordingly. 21.The Defendant in their Defence pleaded the said payments were made by the Plaintiff as a volunteer on the basis that the Plaintiff was entitled to license the Defendant to exploit the “Tube Light” and “Ribbon Lights” or “Ribbon Garlands with lights” 22.The Plaintiff, in retort, produced to this Court the letter dated 16 May 2006 from the Plaintiff’s German lawyer to the Defendant wherein the documents in relation to the registration of the Registered Design as well as the European law published with reference to the Unregistered Industrial Designs rights were enclosed. 23.In response to this letter of 16 May 2006, the Defendant in their letter dated 18May 2006 replied that in connection with the Registered Design , they understood the same was the subject of litigation between the Plaintiff and a third party. The Defendant requested for clarification of court’s determination. Further, the Defendant queried “that a third party claims to have ownership of a copyright covering ribbon garland with mini-lights and LED lights”. They did not mention the identity of this “third party” nor did they produce any documents to substantiate the existence of court proceedings or produce proof that the third party owned the registration of the design identical or substantially similar to the Unregistered Designs. 24.In addition, in letter from the Plaintiff’s German lawyers dated 5 July 2006 to the Defendant, the Plaintiff said to the Defendant that “undisputed royalty shall be paid to a bank account of own client”. 25.Again the Plaintiff wrote to Mr. Theol (“Theol”) of the Defendant on 19 August 2006 by email, asking for payment by the Defendant to him the outstanding monies including the withholding tax of US$12,333.67. It was also mentioned in this email that “you told me every week that you will pay my money”. 26.On 12 September 2006, the Plaintiff through their solicitors in Hong Kong again demanded from the Defendant the sum of US$36,623.72. 27.On 14 September 2006, the Plaintiff’s solicitors revised the demand to US$38,623.72 which included also the sum of US$2,000 as fee previously alleged by the Defendant for incorporation of a Hong Kong corporation (which was not done). 28.In reply, on 15 September 2006, the Defendant by letter agreed the payment of US$26,290.05 to the Plaintiff (after deducting US$12,333.67 as withholding tax) on condition that the Plaintiff produced documentation supporting registration of the Unregistered Designs. 29.It was said unless there was registration of these Unregistered Designs, the Defendant had in fact overpaid the Plaintiff. 30.A statement of account showing the amount of royalties outstanding and payable by the Defendant to the Plaintiff was attached to the Defendant’s letter dated 15 September 2006. The same was reproduced as Schedule A to the amended Statement of Claim. The same supported again the existence of the licence agreement whereby the Defendant was obliged to pay US$1.5 for every piece of goods manufactured and sold adopting the Registered and Unregistered Designs and confirming the outstanding balance due to the Plaintiff being $38,623.72 (without deduction of withholding tax and costs of incorporation of Hong Kong Company). 31.In fact this statement of account sets out in detail the number of articles manufactured for each item (with designated article no.), the relevant invoice no., the amount of licence fee (royalty) payable to the Plaintiff for each item with designated article no. and the total amount of royalty due to the Plaintiff after certain deductions. 32.The licence fee per piece was US$1.50 throughout for all items. 33.It was noted that the Defendant did not plead these deductions. 34.Notwithstanding these protracted exchanges between the parties and/or their solicitors, it was now alleged by the Defendant that there was no agreement between the parties whereby the Defendant was obliged to pay the Plaintiff royalties in respect of use of the Plaintiff’s Registered and /or Unregistered Designs. It was also vaguely alleged that the Defendant did not exploit or use the Registered Design and/or the Unregistered Designs. 35.Clearly from these letters, there was in existence between the parties an agreement for payment of royalties by the Defendant to the Plaintiff in relation to the use and exploitation of these Registered and Unregistered Designs of the Plaintiff. This allegation of “volunteer payments” was no doubt contradicted by these contemporaneous letters, written both by the Plaintiff and the Defendant. 36.There is no doubt that the total outstanding amount due from the Defendant to the Plaintiff is the total of US$12,333.67 and US$26,290.05 i.e. US$ 38,623.72 as claimed by the Plaintiff. 37.The Defendant also threw doubt on the Plaintiff’s pleaded case that the Licensing Agreement was entered into in January 2004. The Defendant relied on Exhibit “TST-14” in the 2nd Affidavit of Theol dated 1 November 2007, i.e. the letter from Mr. Wittmaack (“Wittmaack”), Plaintiff’s German lawyer, dated 6 April 2007 to the Defendant. 38.In this letter, it was said that the Defendant requested for a ‘written licence agreement’. It was noted that in this proposed draft, licence contract period, notice period for termination, yearly minimum licence fee (royalty), manner of payment of licence payment, “licence payments per piece” was mentioned but the rate for this licence payments per piece was not spelt out. 39.The only inference one could reasonably draw was that parties were both aware of this rate prior to the drafting of the written licence agreement, i.e. US$1.5 per piece as the Plaintiff pleaded and as the Defendant put it in his statement of account attached to his letter dated 15 September 2006. 40.There is nothing in this letter of 6 April 2005 which contradicted the pleaded case of the Licence Agreement being made in January 2004. The same clearly could be oral, as the Plaintiff pleaded. 41.The Defendant did plead that any Licence agreement, if existed, did have an implied term, i.e. that the Plaintiff had the right to licence the use and exploitation of these designs and therefore since the Plaintiff had not registered the Unregistered designs, previous payments made by the Defendant in connection with the Unregistered designs were overpayments to the Plaintiff and should be refunded. 42.The Defendant also said the Plaintiff had misrepresented that they had registered the Unregistered Designs. 43.The Defendant said the outstanding royalties in connection with the Unregistered Designs was not due and payable as a result of the non-registration. 44.In exhibit “IDL-7” referred to in the 2nd Affidavit of the Plaintiff dated 17 October 2007, the Plaintiff exhibited copy of the letter from Wittmaack to the Defendant dated 23 May 2005, it was stated:-
45.It is therefore not credible that the Defendant now alleged that all along they thought the Ribbon Garland was a registered design. One can also see that subsequent to this letter, the Defendant did make 7 more payments to the Plaintiff until January 2006. 46.The Defendant said further that in January 2004, at the Christmas World Fair in Germany, Dahlmann was said to be the owner of a registered design, “Tube Light” and that Dahlmann alleged there was other exhibitor at this fair that had infringed their registered design. 47.Now, if Dahlmann was referring to the Plaintiff infringing their right, why would the Defendant later still paid royalties to the Plaintiff for the use of the Registered Design? Clearly the Defendant were fully aware and were satisfied that the Plaintiff had the right to use and exploit the Registered Design as well as the Unregistered Designs. 48.In light of the said payments by the Defendant to the Plaintiff, the contemporaneous exchanges between the parties and/or their lawyers, the Defence pleaded by the Defendant is not believable. 49.The saying that the Defendant was not obliged to pay the Plaintiff for use of the designs did not accord with common sense. The parties were clearly dealing with each other as business entities and there was simply no reason and not logical that the Plaintiff would allow the Defendant to use his designs for free. 2. Does the Plaintiff have enforceable right to use and exploit the Registered Design and Unregistered Designs? 50.In paragraph 4 of the Amended Statement of Claim, the Plaintiff said the Registered Design was a design in connection with the use, production, offering to sell, advertising, import and export of articles of decoration lighting, namely Articles Nos. X159936669, X159936670, X159936671 and X159936672. 51.In paragraph 4A of the same document, the Plaintiff also said that he had invented and designed the Unregistered Design which was used by the Defendant to produce Articles No. X381940208 and X381940209. 52.Again, the Plaintiff said under paragraph 4B and 4C of the Amended Statement of Claim that pursuant to council regulation of the European Community (6/2002), the holder of an unregistered Community design right had the exclusive right to use the design and to prevent any third party not having his consent from using it. 53.The Plaintiff relied on the protection afforded to the Registered and Unregistered Designs under German law. 54.The Registered Design was registered in (a) the German Register for Industrial Designs Rights at DPMA and (b) the EU register of “Office For Harmonization in the Internal Market (Trade Marks and Designs)” (OAMI) were public records. The Plaintiff had exhibited these registration records as part of the exhibit marked “IDL-1” in his affidavit sworn on the 5 September 2007. 55.The Plaintiff had in his affidavit sworn on 5 September 2007 exhibited “IDL-1”, copy letter from this German lawyer Wittmaack dated 4September 2007, the same spelt out that under German Law, a person who created a work had the exclusive right to use his work, especially to duplicate it, to display it and to offer it to the public. Third parties needed a permission from the creators to use the design. Creators had an exclusive right to use their design. Registration was not necessary. 56.Counsel for the Plaintiff submitted that the effect of registration and the rights pertaining to a registered design right in Germany and the European Community were set out in the affidavit of Wittmaack, Plaintiff’s German law expert, dated 19 November 2007, which also confirmed the truthfulness of his letters to the Plaintiff’s Solicitors in Hong Kong dated 4 September 2007 and 17 October 2007. 57.Wittmaack also confirmed that the Plaintiff was the registered and rightful owner of Industrial design patent, registered with DPMA and OAMI as pleaded in respect of the Registered Design and the registration was and is valid at all material times. 58.Wittmaack also confirmed the Plaintiff was the owner of the Unregistered European Community Designs for Articles X38194028 and X381940290, as they were new and specific designs when they were first offered in a Frankfurt Trade Show in Germany. 59.Wittmaack in this letter, later confirmed by affidavit, stressed that under German Law, an oral contract was as binding as a contract in writing and that the German and Community design might be licensed exclusively or non-exclusively. 60.Wittmaack also set out in his affidavit and the 2 letters the protection afforded to an owner of Unregistered Designs. 61.He stated that the unauthorized use of an industrial design was not allowed as they infringed against the exclusive right. 62.Wittmaack had listed the relevant statutes and sections of the German law when addressing the issues. 63.The Defendant did not dispute the fact of these registrations. 64.Although the Defendant in his Defence made denials in nearly all paragraphs, they did not specifically dispute that the Plaintiff invented the Registered and Unregistered Designs. 65.In the Affidavit of Theol, the Defendant denied the Plaintiff had the exclusive right to use and exploit the Registered Design. The Defendant claimed another company called Dahlmann Yave Ltd. also claimed to be owner of the rights picturing registered design. He further said Dahlmann and the Plaintiff were engaged in litigation as a result of which both parties could produce “tube light”. 66.The Defendant further stated that Dahlmann also obtained a GS approval certificate in respect of its product. 67.Dahlmann did not file any affidavit in support of Theol’s affirmation. 68.In reply to these allegations, the Plaintiff in his 2nd affidavit said the court actions between the Plaintiff and Dahlmann did not undermine his exclusive right to the “Tube Light”, i.e. the registered designs. He said the first action took place in Alicante at OHIM (office for the European Union) between January 2003 and April 2003, he succeeded in obtaining an order striking down Dahlmann’s community design right. 69.As for the other court action in Germany, the Plaintiff said he had seeked to restrain Dahlmann from using his German and Community Designs. In the end, parties settled and he licensed his community design rights in the Tube Light to Dahlmann allowing Dahlmann to manufacture products for sale in Europe. He said there was no court ruling that his registered right to use the Tube was not exclusive. 70.Coming to the GS approval certificate mentioned by Theol and exhibited as TST-1 and TST-2 to his affidavit, although “TST-1” concerned Dahlmann, it did not concern the Registered Design and/or Unregistered Designs. 71.As for the “TST-2”, the same concerned a company called Cantec, a total stranger company to these proceedings and the same did not concern the Registered and/or Unregistered Designs. 72.These documents are not relevant to the issues here. 73.Further, on the Defendant’s own admission, the GS approval certificate was issued for the purpose of signifying compliance with the standards and safety regulations of a product. It bore no relevance to the ownership of an industrial design right. 74.On reading the certificate, the same was headed “GS Safety Mark” and “Approval certificate”. 75.The Plaintiff said in his affidavit that such certificate was usually obtained by manufacturer of a product, giving assurance to the potential buyer that the same was electrically safe. 76.In the letter from Wittmaack to the Defendant dated 23 May 2005, it said “For the ribbon garland there has been no registration yet. This is still in progress. In case Mr. Ljubojevic agrees you can add this item to your GS Certificate.” 77.The Defendant needed to ask the consent of the Plaintiff before this “Ribbon Garland” could be added to his GS Certificate. The Defendant was not the owner of this Ribbon Garland design. It clearly showed that GS Certificate had no relevance to ownership of a design right. 78.Theol said in his affidavit that Dahlmann was manufacturing and selling a certified approved Ribbon light in Year 2004 as indicated in their quotations of 25 October 2004 and 3 November 2004 and exhibited as “TST-4”. He said when he updated Defendant’s director Luebbermann in his meeting with the Plaintiff on 25th and 27th April 2004, he was told that Ribbon Garland with lights were already on the market. He said Luebbermann provided him brochure of Dahlmann regarding an exhibition held between 24th to 30th April 2004, exhibited as “TST-5”. It was said that the same included display of Lantern “Tube Lights” and Ribbon Garland with lights. Theol said this happened in the year prior to the year when the Defendant produced the sample of Ribbon Garland with lights. 79.Again, if these are indeed believable, why would the Defendant still continue to pay the Plaintiff afterwards for the use of the Registered and Unregistered Designs? 80.As said earlier, the Defendant had not filed any affidavit of Dahlmann or Luebbermann in this application to support their case. 81.The Plaintiff asserted that he was the one inventing the Unregistered Designs and owning the designs. The Plaintiff further said in fact that as the designs used by Dahlmann was very different from the Unregistered Designs, the Plaintiff did not claim against Dahlmann for exploitation of the Unregistered Designs nor did Dalhmann claim against the Plaintiff. 82.The Defendant’s saying that someone else was manufacturing or marketing the said designs did not raise a triable issue regarding the ownership of these designs. 83.In addition, one could not see from the quotations or brochure exhibited that these products manufactured/marketed by Dahlmann was anywhere near to identical /substantially same to the Unregistered designs. 84.On evidence, I accept that the Plaintiff does have enforceable industrial design right in Germany in relation to the Registered Design and the Unregistered Designs and that a valid and enforceable Licence Agreement did exist between the parties, as pleaded by the Plaintiff. 85.The Defendant again failed to establish a triable issue here. 3. Does the dispute on ‘Applicable Laws and Jurisdiction’ raise a triable issue? 86.The Plaintiff said that the Licence Agreement between the parties was validly entered into and enforceable pursuant to German law (para. 6 of the amended Statement of Claim). 87.He said the Registered Design was registered in the German and European Community register and that the Licensing Agreement was concluded in Germany. 88.He added that the exploitation of these designs by the Defendant also took place in Germany i.e. when the Defendant sold the products to a German company OTTO VERSAND. 89.The Plaintiff agreed that the parties never expressly agreed orally or in writing on the use of laws and he said therefore that the proper applicable law was German law. 90.Although the Defendant denied German Law was applicable (para. 6 of the amended defence and counterclaim), they did not say what the applicable law should be. 91.Counsel for the Defendant submitted that where an issue of law is raised, the Court should grant leave to defend. 92.With respect, this Court disagrees to the same. By bare assertion that German Law is not applicable does not by itself raise a triable issue. 93.In the case of The Grieshem [1983] 1 HKC 251, it was held that the foreign law must be proved as a fact to the satisfaction of the Judge. Unless the circumstances be exceptional, when a party sought to rely upon the evidence of an expert to prove foreign law, that evidence should be embodied in an affidavit or affirmation sworn or affirmed by the expert himself. 94.In any event, as Counsel for the Plaintiff pointed out, the Plaintiff was only relying on the principle of offer and acceptance in contract law. The Plaintiff’s German law expert Wittmaack said that under German Law, an oral contract was equally binding as a contract in writing. 95.In the absence of any allegation by the Defendant as to what the applicable laws and jurisdiction should be and whether the applicable law in this case accorded with German Law, the Plaintiff had failed to discharge the burden of establishing a triable issue. 96.The Plaintiff on the other hand had adduced German law by way of affidavit by Wittmaack, a practising German lawyer. 97.It was also submitted by counsel for the Defendant that the Plaintiff had failed to comply with Order 38 rule 7. 98.Order 38 rule 7 clearly had no application in our case here as the same concerned only with adducing in evidence a finding or decision on a question of foreign law by virtue of section 59 of the Evidence Ordinace Cap. 8, Laws of Hong Kong. 99.It must also not be forgotten that in an Order 14 application, the burden lies on the Defendant to establish a triable issue or set up a believable defence. 100.The allegations of the Defendant intended to ursurp the Plaintiff’s rights to the Registered and Unregistered Designs, that someone else had better rights than the Plaintiff regarding the Registered and/or Unregistered Designs were vague and lack of relevant documentation in support. 101.The rights of the Plaintiff to these Registered and Unregistered Designs remained unchallenged. The same applied for the existence of the Licence Agreement as pleaded by the Plaintiff. The claimed amount was also supported by numerous correspondence between the parties. Conclusion 102.This Court finds the Defendant in the present application had failed to discharge the burden of establishing a triable issue. The Defence advanced by the Defendant was not believable and this Court therefore grants judgment in favour of the Plaintiff 103.The Defendant shall pay the Plaintiff:-
104.This Court also made an order nisi that the Defendant shall pay the Plaintiff costs of this action, including costs of and occasioned by this application and including all costs reserved, the same to be taxed if not agreed with certificate for counsel. This order nisi shall be made absolute on expiration of 14 days.
Representation: Miss Elizabeth Yang instructed by Messrs. F. Zimmern & Co. for the Plaintiff. Mr. Giles of Messrs. Horvath & Giles for the Defendant. |