Oriental Food Industries Sdn Bhd v. Sze Hing Loong Development Ltd

HCA 2094/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2094 OF 2011

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BETWEEN

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J U D G M E N T

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Introduction

1.This is the plaintiff’s application for summary judgment against the defendant for trade mark infringement and/or passing off in relation the plaintiff’s trade marks and/or get-up regarding the packaging of the plaintiff’s SUPER RING snack product.

2.The plaintiff (“P”) in its amended statement of claim (“ASOC”) complained of the infringing acts of the defendant (“D’) in relation to the marketing and sale of (i) D’s SUPER RING product and (ii) D’s SUPER OOOH product.

3.P’s present application in relation to infringement against D is only in respect of D’s SUPER RING product (“PRODUCT”).  P’s claim in respect of (ii), namely SUPER OOOH product is to be dealt with at the trial of this action.

4.Counsel Mr Dominic Pun appeared for P and Senior Counsel Ms Winnie Tam appeared for D at the hearing before this court.

Brief Background

5.P, Oriental Food Industries Sdn Bhd, is a company incorporated under the laws of Malaysia with a principal place of business in Melaka, Malaysia and its business is said to be producing and selling snack foods and confectionery products for distribution in Malaysia and overseas markets.  According to P, it has at all material times been the manufacturer of the Product, among other snack products.

6.Since about 1961, Sze Hing Loong Confectionery Company in Hong Kong (“SHL Business”) had imported food and snack products from overseas snack manufacturers for sale in Hong Kong under its Sze Hing Loong (時興隆) trade name (“SHL Trade Name”) and its house mark (“SHL House Mark”).

7.According to D, on 2 July 1982, the SHL Business, together with the entirety of its good will, was assigned to a limited liability company Sze Hing Sze Hing Loong Development Limited upon its incorporation under registration number 113771 which since 8 April 2008 had been renamed Sze Hing Loong Holdings Limited (“SHL”).

8.It was not disputed that, at all material times from at least 1989 onwards, SHL was appointed by P as its agent and/or its sole distributor for the purposes of importing and distributing the Product in Hong Kong.  Such appointment and distributorship agreement was by way of an oral arrangement (“Distributorship Arrangement”).  It was also not disputed that the Distributorship Arrangement was terminated sometime in 2008 (“Termination”).

9.It was P’s case that the Product, as distributed by SHL under the Distributorship Arrangement, had been sold and marketed in Hong Kong by reference to a distinctive packaging which incorporated various marks and/or a distinctive get-up:

(a)  The trade mark “SUPER RING” (“SUPER RING Mark”);

(b)  A device mark, similar to which was later registered in Hong Kong as a Trade Mark No 30143079 for goods under Class 29 and 30 on 14 May 2009 (“Trade Mark A”);

(c)  A device mark, similar to which was later registered in Hong Kong as a Trade Mark No 301420811 for goods under Class 29 and 40 on 4 September 2009 (“Trade Mark B”);

(d)  A distinctive get-up incorporating Trade Mark A, Trade Mark B, and the SUPER RING Mark in a purple and orange background colour scheme as shown in Schedule AA to P’s ASOC (“Get-Up”).

(b) and (c) above are collectively referred to as (“P’s Marks”).

10.D is a limited liability company incorporated under the laws of Hong Kong on 31 January 2008 under registration number 1208811.  D is engaged in the business of producing, importing, marketing and selling foodstuffs of various kinds, including snack foods.

11.D and SHL belong to the same group of companies and share the same shareholders and directors.  According to D, on 8 April 2008, D and SHL swapped their respective names, and SHL purportedly assigned the SHL Business to D.  P’s case was that the swapping of names and the assignment of the SHL business by SHL to D was unknown to P at the time.

12.According to the 1^st affirmation filed on behalf of P by its Executive Director Son Tong Leung (“TL Son”), in around 2008, it discovered that a cheese flavor snack product, with a packaging which was in all material respects identical to the Product, was introduced into the market without P’s consent (“D’s SUPER RING Product”), a sample of which had been obtained by P on 4 September 2009.  P’s alleged discovery “in around 2008” was not admitted by D. 

13.P’s case was that D’s SUPER RING Product bore the Super Ring Mark, P’s Marks and the Get-Up, but the packaging bore the SHL House Mark and words indicating that D’s SUPER RING Product was a product of China. Upon its discovery, P said it complained to SHL, stopped supplying the Product to SHL and terminated the Distributorship Arrangement.

14.D admitted dealing with D’s SUPER RING Product in Hong Kong not of P’s manufacture but D explained this was due to the late shipment of the Product from P.  Further according to D, it had stopped the sale of D’s SUPER RING Product prior to September 2009 and started to sell its own SUPER OOOH product instead in about October 2009. 

15.P had also alleged that D’s packaging of the SUPER OOOH product was a slightly altered version of the packaging of the Product, and still strikingly similar, and that D was trying to sail close to the wind by replacing D’s SUPER RING Product by its SUPER OOOH product.  As I have said earlier, this is a matter which will go to trial.

16.Further, P said it discovered that in mid-2009, unbeknown to P, SHL had applied to register in Hong Kong Trade Mark No 300118791 (“SUPER RING & Device Mark”) and No 300219393 (“Oriental & Device Mark”) both under classes 29 and 30 on 28 November 2003 and 21 May 2004.  After a cease and desist letter dated 31 July 2009, SHL voluntarily surrendered the registration of the SUPER RING & Device Mark and the Oriental & Device Mark on 28 August 2009 and 18 August 2009 respectively.  It was further P’s case that at the time of sending the cease and desist letter, P did not know that SHL and D had switched names.

17.On about 18 August 2009, D applied to register the mark “SUPER OOOH” in Classes 29 and 30 (Application No 301408158) which proceeded to registration on 18 December 2009.

18.After the above application, on 24 August 2009, D issued a writ under HCA No 1821 of 2009, claiming against P for passing off by using the get-up of the SUPER RING product packaging.  This writ was, however, never served on P, and no statement of claim had been served.

19.Thereafter, on 3 September 2009, P filed new trade mark applications  in Hong Kong for the SUPER RING word marks (No 30149859 AA and No 30149859 AB) and the packaging design mark (No 301419840).  D opposed the applications on the basis that it had made substantial use of the relevant SUPER RING word marks and packaging design mark, and that it owned the relevant goodwill regarding the marks (“Opposition Proceedings”)[1].  After D’s Counter Statements were filed, the Opposition Proceedings had been stayed by consent pending the outcome of the present action.

20.P alleged that after the Termination it had attempted to sell in Hong Kong the Product through other distributors, but D had threatened legal action against those companies, and also other potential trade customers, to scare them off from selling the Product.  

21.P eventually issued the generally indorsed writ herein on 9 December 2011.  It was not until 6 August 2012 that P filed its original statement of claim (“SOC”).

22.Subsequently, P’s ASOC was filed on 6 August 2014, and D filed its amended defence and counterclaim on 23 October 2014 (“AD&C”).  P’s amended reply and defence to counterclaim was later filed on 4 December 2014 (“ARDC”).

23.P issued the present summons for summary judgment on 2 December 2013 (“O14 Summons”) which was later amended on 6 August 2014.  P sought judgment for, among others, a permanent injunction restraining D from passing off of products not of P’s manufacture by the use of the SUPER RING Mark, P’s Marks and the Get-Up and restraining D from infringing P’s Marks, and for an inquiry as to damages.

24.It was pleaded in the ASOC that all sales of the Product in Hong Kong and the marketing and promotion by reference to the Super Ring Mark, P’s Marks and the Get-Up were carried out by SHL as an agent and/or a distributor on P’s behalf and all and any goodwill built up in Hong Kong in respect of the Super Ring Mark, P’s Marks and/or the Get-Up in consequence thereof (“SUPER RING Goodwill”) was and continued to be owned by P exclusively[2].

25.In the AD&C, D admitted that all sales of the Products in Hong Kong were carried out by SHL but denied that the SUPER RING Goodwill or any part of it in consequence thereof was owned or solely owned by P.  D’s defence to P’s claims of passing off and infringement was that D had acquired or shared the SUPER RING Goodwill by reason of having single-handedly created and developed the market for the Product in Hong Kong.  It had further alleged that P had abandoned the SUPER RING Goodwill since 2009.

26.For the purposes of the present O14 Summons, D focused on its defence on whether P owned/owns SUPER RING Goodwill exclusively.

The Legal Principles

On application for summary judgment under Order 14

27.The principles on the grant of summary judgment under Order 14 are well established[3] and summarized by Ms Tam as follows:

(i)   It is for the defendant to show an arguable defence or triable issue. The test is whether the defendant’s assertions are believable and not whether they are to be believed.  That test is to be answered by taking those assertions in the context of the background that is either undisputed or beyond reasonable dispute.

(ii)  In assessing the credibility of the defendant’s factual case, the court will not embark on a mini-trial on affidavit evidence.  The length of the hearing and volume of documents may demonstrate that the application should not be allowed to proceed.

(iii)   Summary judgment should not be granted when any serious conflict as to a matter of fact or any real difficulty as to law arises.

(iv)   Further, summary judgment must only be given on the plaintiff’s pleaded case[4].

28.There was no real dispute by Mr Pun on the above general principles.

29.Ms Tam had also referred this court to the case of ChristieManson & Woods v Chritrs [2012] 5 HKLRD 829 where Au-Yeung J had said that there was nothing in principle to prevent the granting of summary judgment in intellectual property cases where there was no triable issue, even where the decision would involve the making of a finely balance of evaluation of qualitative matters by the judge, but Au-Yeung J went on to say that the issue on “likely to cause confusion on the part of the public” was one which had been accepted as being one which would be difficult to determine on a summary judgment application[5].

On Passing Off

30.As submitted by Mr Pun, in order to succeed in a claim for passing off, a plaintiff must establish the 3 essential elements of the tort[6], namely:

(i)   that the plaintiff enjoys reputation and goodwill in the name, mark or indicia which it wishes to prevent the defendant from using;

(ii)  that the defendant has made a misrepresentation which was likely to lead members of the public to believe that his business, goods or services are the business, goods or services of the plaintiff; and

(iii)   that the plaintiff was suffering and was likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation.

31.Mr Pun had further referred this court to Guangdong Foodstuffs Import & Export (Group) Corp & Anor v Tung Fook Chinese Wine (1982) Co Ltd & Anor [1999] 3 HKLRD 545.  As summarized by Cheung J, as he then was, passing off is concerned with misrepresentations made by one trader which damage the goodwill of another.  Misrepresentation, damage and goodwill are the three essential elements of the plot of passing‑off[7].

32.It was held in the above case that in ascertaining ownership of goodwill, there were two applicable tests, namely, the public perception test and the control test[8].  Cheung J had quoted the following passage from Wadlow on the Law of Passing- off (2^nd Ed)[9]:

“... Goodwill is created by trading activities, but it often happens that more than one business is involved in the sequence which results in goods or services being made available to the consuming public. If so, then the question arises of which of those businesses is the owner of goodwill which the law recognizes as damaged when a third party passes off his goods or business as those with which the public is acquainted. The problem arises in two main contexts. One is where two or more businesses which have previously worked together fall out. ...”

“There are two distinct, and not necessarily consistent, standards in this passage. One is to ask who is in fact most responsible for the character or quality of the goods; the other is to ask who is perceived by the public as being responsible. The latter is the more important, but it does not provide a complete answer to the problem because in many cases the public is not concerned with identifying or distinguishing between the various parties who may be associated with the goods. If so, actual control provides a less conclusive test, but one which does yield a definite answer.

To expand, the following questions are relevant as to who owns the goodwill in respect of a particular line of goods, or, mutatis mutandis, a business for the provision of services:

(1) Are the goods bought on the strength of the reputation of an identifiable trader?

(2) Who does the public perceive as responsible for the character or quality of the goods? Who would be blamed if they were bad?

(3) Who is most responsible in fact for the character or quality of the goods?

(4) What circumstances support or contradict the claim of any particular trader to be the owner of the goodwill? For example, goodwill is more likely to belong to the manufacturer if the goods are distributed through more than one dealer, either at once or in succession. If more than one manufacturer supplies goods to a dealer and they are indistinguishable, the dealer is more likely to own the goodwill.

If one of these gives a result, the goodwill may generally be assumed to belong to the actual manufacturer of the goods.”

33.Further, on ‘foreign businesses and their representatives’, Cheung J had then also quoted the following passage from Wadlow[10]:

“A foreign business may have a goodwill in the jurisdiction even though it may not trade here in its own right. It is sufficient that customers for its goods are to be found here, whether or not the foreign business is in direct contractual relations with them. In particular, if the foreign business is represented by a legally distinct person of whatever capacity then the goodwill will in general belong to the foreign business rather than its local representative provided that the foreign business is recognised as the ultimate source of the goods. It is not necessary, or common, for the relationship to be one of agency in the strict legal sense.”

“... The relevant English goodwill most clearly belongs to the foreign business if the foreign business is in fact predominantly responsible for the character or quality of the goods and the English business is held out as representing the foreign one, either expressly or by implication.

On general principles it is unnecessary for the foreign business to be known by name provided its existence is known or assumed.  The most important factor would appear to be the state of the public mind, so that if the public attributes the goods to the foreign business then it may not matter that the foreign business does not manufacture them, and may exercise less control over the local business or the goods themselves than the public may suppose.”

34.It had been stated by the President Sir Stephen Brown in the English Court of Appeal decision in Scandecor Development v Scandecor Marketing [1999] FSR 26 CA that:

“We accept that, in an appropriate case, it is legally and factually possible for a business based overseas to acquire a goodwill in this country by the supply of its products or services through a subsidiary, agent or licensee. Whether or not that occurs must depend on the facts of the particular case[11].”

35.As pointed out in the Scandecor case, a company incorporated outside a local territory and carrying on business in a number of other countries may expand into that local territory in a number of ways, including establishing a branch or form a subsidiary company to manufacture or to trade in its products or service in the local territory, or appointing an unconnected company to act as the sole or exclusive distributor of its products or the supplies of services in that local territory or entering into an agreement with a local company to make and sell its products under licence, and the local company may use the same marks in the territory as the foreign company uses in other territories both in its corporate name and in relation to its products and service, and difficulties are likely to arise when the corporate or the contractual connection is severed and there are no express pos-termination contractual provisions designed specifically to regulate the future use of the mark in the local territory[12].

36.The Court of Appeal went on to say in the above case :

“The legal response is that this problem, if not resolved by agreement, is ultimately soluble only by a factual inquiry with all the disadvantages of the length of is duration, the costs of its conduct and uncertainty of its outcome. There are no quick, cheap or easy answers to be found in hard and fast legal rules, in binding precedents or in clear cut factual and legal presumptions[13].”

Guangzhou Green-Enhan Bio-Engineering v Sun Yat-Sen University (unreported HCA 4651/2002 8.4.2005) where Lam J, as he then was, and now Lam VP had referred to Scandecor and said ownership of goodwill might be transferred by prior or subsequent agreement and that the first question to ask would therefore be what was the contractual arrangement between the parties[14].  The court could imply an agreement as to the ownership of goodwill upon termination of the relationship[15].  Lam VP had further said, following Scandecor that in the absence of any agreement between the parties governing the ownership of the goodwill, the matter would have to be resolved by way of a factual inquiry and there were no hard and fast legal rules in binding precedents or in factual or legal presumptions. 

38.Lam VP had referred to the 4 relevant questions set out in the passages quoted from Wadlow for the resolution of the dispute of ownership (“4 Questions”), and the broadly referred to ‘public perception test’ and the ‘control test’, pointing out that the former examined the public perception regarding who was responsible for the products whilst the latter focused on asking who was in fact responsible for the character, quality control and production of the products, but went on to say that although these two tests could be adopted as useful starting points for the factual inquiry, he did not think they should be regarded as the exclusive tests to be applied, and that recent cases show that the court should examine all the relevant circumstances instead of focusing on these two aspects[16].

39.Lam VP further pointed out that it would be relevant to examine which of the parties were known to the market before the distributorship.  A case where a well-known trading firm sourced a product from an unknown supplier and then marketed the products in its own packaging without reference to the name of the manufacturer may be different from a case where the selling point of the product was the manufacturer[17], and it was relevant to distinguish manufacturer’s marks from dealer’s marks.  The former would indicate the manufacturing source and identify that the goods were of foreign origin. The latter would show that the dealer ‘selected’ the goods and that the goods had been made to the dealer’s special order[18].

40.Ms Tam had also referred to Taiwan Fu Hsing Industrial Company Limited and E Bon Building Materials Company Limited unreported HCA 849 of 2004, 10.09.2008 in that what began as a foreign manufacturer’s mark could in time end as the mark of the local distributor or of the distributor’s own manufactured goods if there was a clear dissociation from the initial significance of the mark so as to warrant the conclusion that the mark had become exclusively indicative in the local territory of the local distributor’s goods[19].

On Trade Mark Infringement

41.Under s 18 (1) of the Trade Marks Ordinance Cap 559, a person infringes a trade mark if he uses in the course of trade or business a sign which is identical to the trade mark in relation to goods which are identical to those for which it is registered.

42.As stated in Kerly’s Law of Trade Marks and Trade Names 15^th Ed, a sign will be identical with the registered mark where it reproduces, without any modification or addition, all the elements constituting the mark or where, viewed as a whole, it contains differences so insignificant they may go unnoticed by the average consumer[20].

43.There was no dispute on the above general principles.

44.With the above principles and guidelines in mind, I turn to consider the present application.

Passing Off

Ownership of the SUPER RING Goodwill

On Contractual Arrangement

45.As stated by Lam VP in the Guangzhou Green-Enhan case, the starting point is whether there was any contractual arrangement between the parties as to the ownership of the SUPER RING Goodwill. 

46.Mr Pun had said there was no provision in the Distributorship Arrangement as to the ownership of the SUPER RING Goodwill.

47.Ms Tam submitted that the only plea in the ASOC as to P’s SUPER RING Goodwill was simply that all sales and advertisements of the Product were carried out by SHL as agent and/or distributor on D’s behalf, and thus in consequence thereof the SUPER RING Goodwill was owned by P exclusively and that this plea was wholly deficient, and that D should not be permitted to rely on any contractual agreement beyond what was pleaded in the ASOC.

48.There was no dispute that the Distributorship Arrangement was arrived at orally.  In the AD&C, D had pleaded that the Distributorship Arrangement was evidenced partly by conduct, and further that :

(i)   It was a material term of the Distributorship Arrangement that, among other things, the taste of the Product was to be modified and tailored to fit SHL’s requirements (“Taste Modification”), and that as a condition precedent to entering into the Distributorship Arrangement, the SHL Trade Name and SHL House Mark should be printed conspicuously on the packaging of the Products (“Packaging Requirement”);

(ii)  On a true interpretation of the Distributorship Arrangement and/or otherwise implied into the Distributorship Arrangements as it was necessary to give business efficacy to it, and in order to reflect the common understanding of the parties, that the P and SHL had agreed, among other things, (a) SHL was to act as P’s sole distributor of the Products on an exclusive basis in Hong Kong, and (b) P’s ownership of the SUPER RING Goodwill in Hong Kong was to be transferred to and vested absolutely in SHL by the commencement of the Distributorship Arrangement and was to remain vested in SHL or its assigns after the Termination.

49.Ms Tam had submitted that it was more than arguable that the Distributorship Arrangement appointed SHL as the sole distributor of the Products to the exclusion of even P, and that as evidenced by the parties’ conduct until 2009, P had not attempted to sell the Products in Hong Kong and had co-operated with SHL in preventing parallel imports and that these would be objective matters contradicting suggestion of any agreement, express or implied, that the local goodwill had been vested in P from the outset of the Distributorship Arrangement.

50.P had denied in its ARDC that it had ever agreed to transfer the SUPER RING Goodwill to SHL, whether by way of an implied term of the Distributorship or otherwise, and further had averred that it had never been the intention of P to transfer the SUPER RING Goodwill to any third party including SHL since P had spent a large amount of effort and resources building up the SUPER RING Goodwill and securing the registrations of its SUPER RING and related trade marks in many countries.  P had further averred that by the matters pleaded that the conduct of SHL and/or D had been totally inconsistent with the allegation that they had been the owner of the SUPER RING Goodwill.

51.It was Ms Tam’s submission that P’s subjective intention would not be relevant to the construction of the contractual terms, and  also P’s reliance on what was purportedly SHL’s subjective belief as to the ownership of goodwill would also be irrelevant . 

52.Ms Tam had referred this court to Spencer v Secretary of State for Defence [2012] L&TR 21 where Vos J, as he then was, had said that the entire construction exercise was about determining what a reasonable person would take the contract to mean, not about determining the subjective intentions of the parties[21].   

53.TL Son had in his 2^nd affirmation denied that his father or P had ever had any intention of ceding or transferring ownership of the SUPER RING Goodwill.  TL Son had also disagreed that the Taste Modification was a material term or that Packaging Requirement was a condition precedent to the Distributorship Arrangement and said allowing SHL’s House Mark to be put on the packaging was to show P’s sincerity in fostering and furthering the business relationship between P and SHL and by agreeing that P would not sell the Product to known parallel imports, P was simply cementing the relationship[22].

54.The Distributorship Arrangement was said to be orally arrived at in 1989 between the father of TL Son and the founder of P, Mr Son Chen Chuan (“CC Son”) on behalf of P and Mr Cheung Hong Chin (“Cheung”), D’s Managing Director, on behalf of D.  So far, CC Son had not filed any affirmation.  TL Son had only been associated with P for about 19 years since about 1994.  Although TL Son had said that facts and matters in his affirmations were within his own knowledge or gleaned by him from P’s books and records, or related to him by his father CC Son, he would not have any personal first hand knowledge of matters prior to his association with P, namely what was orally agreed between CC Son and Cheung.

55.Having considered the evidence presently available before this court, I am unable to say at this stage what D is alleging about the agreed terms of the Distributorship Arrangement, whether express or implied, is unarguable.

56.In any event, in the absence of any contractual agreement between the parties in relation to the SUPER RING Goodwill, express or implied, the matter would have to be resolved by way of a factual inquiry[23].  As seen from the general principles set out earlier in the various authorities, the court would have to consider all the relevant facts and circumstances in the case for the resolution of the dispute of ownership of the goodwill, with the starting tests of “public perception” and “control”, and also the 4 Questions.  As submitted by Mr Pun, this would boil down to who had been responsible for the character, quality control and production of the Product, both in terms of public perception, and in fact.

Actual Control and Public Perception

57.D had set out in the AD&C the approximate annual gross sales turnover figures for the Product in Hong Kong from 2002 – 2009, which reached HK$5m during the years 2005-2006.  D’s figures seemed much higher than P’s pleaded figures. Cheung had explained that the difference was the mark-up or expenses incurred by SHL and retailers, but said D’s figures showed the gross annual turnover of the Product according to the price charged to the end customers and would more appropriately reflect the turnover and goodwill in the Product.  Whichever set of figures one looks at, the sales of the Product were good.

58.D’s case was that the SUPER RING Goodwill had at all material times been vested solely in SHL (and D), or alternatively jointly in P and SHL (and D).  

59.In so far as actual control was concerned, P’s case was that being the manufacturer of the Product, it had obviously been solely responsible for the character, quality control and product of the Product.   It was P which devised and designed the SUPER RING Mark, P’s Trade Marks, the Get-Up and/or package of the Product, and it was P who had sole control over the changes made to the packaging of the Product, and that P had also been solely responsible for the taste, recipe, formulation and production of the Product.

60.D’s case was , however, that it had taken responsibility for the character and quality of the Product, and such had included modifying the taste and seasoning content of the Product to cater for the taste of consumers in Hong Kong and requesting new lines of the Product  including a large sized version of the Product and that eventually P produced the 70 gram version in late 2000, and further conducting yearly factory inspections of P’s factory in Malaysia, checking air leakage and consumption dates, keeping the Product in an air-conditioned warehouse rented by SHL/D and that SHL/D had assumed the responsibility of dealing with customer complaints in Hong Kong.

61.Mr Pun, however, submitted that the modifying of taste or requests for new lines of the Product were only “requests” and were not a “demand” or “order”, and further the fact that D was not in a position to resist P’s decision in 2004 to remove the SHL House Mark from the packaging of the Product would show that D had no actual control.  As for checking air leakage and consumption dates, keeping the product in air-conditioned warehouse or dealing with complaints, these were typical part of a sole distributor’s responsibilities.

62.According to D, excluding changes in the details printed on the back of the packaging (such as nutrition facts and ingredients), there had been the following packaging:

(i)   Test Packaging – from about 1989 to 1990 of a limited number of the Product for the purposes of testing the market demand and customer’s taste;

They bore only the SUPER RING Mark and device marks similar to P’s Trade Marks, but there was no P’s House Mark.

(ii)  Packaging A – used from 1990 to about 1996 for the Small Sized Product ( 20 gram sized version) that was sold in Hong Kong:

This contained the SHL House Mark in a prominent position in the middle of the front side of the polybag as the primary mark in accordance with SHL’s Packaging Requirement, and the SUPER RING Mark appeared immediately above the SHL House Mark.  According to D, P’s House Mark did not appear on Packaging A in its present form.

(iii)   Packaging B – used from between 1996 to about September 2004 for the Small Sized Product that was sold in Hong Kong:  This contained the SHL House Mark in a prominent position in the top left hand corner of the front side of the polybag as a primary mark, which met SHL’s Packaging Requirement. The ‘SUPER RING” Mark appeared immediately below the SHL House Mark.  P’s House Mark, which was roughly a third of the size of the SHL House Mark appeared at the back of the polybag.

(iv)   Packaging C– used between November 2002 to about September 2004 in respect of the Large Sized Product that was sold in Hong Kong:

This looked substantially similar to Packaging B. The SHL House Mark appeared prominently at the top left corner on the front side of the packaging as a primary mark, which also met D’s Packaging Requirement and P’s House Mark was roughly a fifth of the size of the SHL House Mark and thus less conspicuous than that in Packaging B.

(v)  Packaging D – used from about late 2004 to Termination in respect of both the Small and Large Sized Product that were sold in Hong Kong:

This did not carry the SHL House Mark.

63.P denied what D had said about the Test Packaging or that the Product was sold in Hong Kong for the purpose of testing the market demand and customers’ taste.  P, however, accepted that there had been changes to the packaging of the Product over the years, but said these were minor, and that the Get-Up had remained more or less the same, in that such always incorporated P’s Trade Marks/similar device marks and the Get-Up.  In particular, Packaging D had been used since 2004.

64.Anyway, it did not seem to be disputed that from 2004 onwards Packaging D had been used, which had borne P’s House Mark (both on the front and at the back of the packaging) with P’s address in Malaysia and also words indicating that P was the manufacturer of the Product and that it was manufactured in Malaysia, and although Packaging D did not bear the SHL House Mark, there had been a sticker affixed on the packaging containing the SHL Trade Name showing that SHL was the sole agent and SHL’s contact details.

65.According to Cheung, it was P’s unilateral decision in 2004 to disregard the Packaging Requirement agreed between him and CC Son in 1989 and to insist on the Packaging D.  Cheung said notwithstanding P’s unilateral decision, SHL continued to do business with P because SHL had already been put to significant expense in developing the market for the Product in Hong Kong, and if SHL were to give up the distribution of the Product in 2004, SHL would have suffered an overall loss, and that by 2004, the public had come to firmly recognize that the Product belonged to a group of quality snack products carefully selected by SHL. 

66.It was also D’s case that since/after 2004, the Product was still referred to as “時興隆芝士圈” and as part of the“時興隆” family of products and was marketed as such.  Cheung had exhibited advertisements to show that the Product was advertised and marketed as part of “時興隆” family of products[24].

67.On the other hand, Mr Pun submitted that D’s evidence showed that such sale and promotion had always been made by reference to the packaging of the Product, which clearly identified P as the manufacturer and that the Product was a product from Malaysia and that SHL was a mere sole agent/distributor, and also the SHL House Mark on the packaging did not change the public perception that the source of the product was P in Malaysia, and in any event ,the SHL House Mark ceased to exist on the packaging of the Product in 2004.

68.Cheung had also said in his affirmation that as SHL and D saw themselves as the owner of the SUPER RING Goodwill, it was natural that D was concerned about defects in the Product and complaints by end consumers and the reputation of SHL was built upon it having selected and stood behind the quality of the products it markets.  As mentioned earlier, D had referred to how it had carried out its responsibilities and in particular, SHL and D had assumed the responsibility of dealing with customer complaints in Hong Kong as part of its after-sale services[25].

69.Most of the complaints as seen from those email exchanges produced by Cheung seemed to be after 2004, and although D did pass on the complaints to P and looked to P for compensation, there did not seem to be any evidence from P that the customer complaints had in fact been dealt with or resolved by P directly between P and the customers, as most of the direct telephone calls P said it made to the complainants were said to be unanswered. 

70.In relation to dealing with complaints, D’s present evidence would tend to indicate that the public would look towards D, rather than P, as their contact for complaint, and this was so even after 2004.  In particular, in one of the email from a complainant dated 25 January 2006 which was written in Chinese, the complainant had referred to the Product being produced by SHL, namely “有關貴司生產的芝士圈 Super Ring Cheese Flav Snack #4008…”[26].  Also, as seen from the emails, after one consumer’s complaint, the Food & Environmental Hygiene Department officer had visited D’s address and checked D’s warehouse facility and all the stock of the Products to evaluate the hygiene condition.

71.In the Guangzhou Green-Enhan case, when considering the public perception, Lam VP had said, in respect of the packaging and advertisement of the subject products, what would be significant would be the message conveyed to the consumers by the advertisement.

72.Although SHL was incorporated in 1982, Cheung said he founded the SHL Business in 1961 as a sole proprietor since when the business had operated by reference to the SHL Trade name and had been engaged in the distribution of food products in Hong Kong.  Cheung had further said that SHL had acquired a substantial reputation and valuable goodwill in the SHL Trade Name and the SHL House Mark in relation to the sale of snack products as over the years, SHL had spent significant funds on television commercials and other forms of advertisements broadcasted by TVB.  By 1989, SHL and its predecessor had already been carrying on the business for almost 28 years. 

73.TL Son admitted that the Product was not sold in Hong Kong before 1989 and that P had never tried to sell its products in Hong Kong before 1989[27].  There was no sufficient evidence that P was known in Hong Kong as a well known snack food and products manufacturer in 1989, or thereafter.  The relationship between P and D from 1989 until Termination in 2008 spanned over almost 20 years.  The annual gross sales of the Product seemed to reach the highest around 2006.  

74.The SHL House Mark is in Chinese and both “時興隆” and “芝士圈” were on the front of Packaging A, B and C, and even though the SHL House Mark was no longer present in Packaging D since 2004, the packaging still bore the SHL Trade name in Chinese.  Further, according to D, after 2004, the Product was still referred to as “時興隆 芝士圈”.  P had said it had contributed towards D’s advertising costs.  Anyway, I note that the Product was sold and promoted by convenience stores/supermarkets such as 7 Eleven, Circle K, Wellcome.  All the advertisements produced by D were in Chinese and in Chinese newspapers.  It would appear that the consumers targeted by the advertisements/promotion would be Chinese speaking.

75.In the above circumstances, what was submitted by Ms Tam, namely the effect on the public when they saw the packaging, they would see the Chinese SHL House Mark and/or the Chinese SHL Trade name and the source of manufacture would not matter, is not unarguable.

76.Having considered the 4 Questions and the above, I have come to the view that D has raised triable issues as to whether the SUPER RING Goodwill has exclusively belonged to P after the Distributorship Arrangement.

Other Matters

77.Mr Pun had submitted that D’s argument that the SUPER RING Goodwill belonged to SHL/D was not genuine since such argument was totally inconsistent with the past conduct of SHL and/or D, namely:

(1)  Before the complaint made by P in 2008 regarding D’s SUPER RING Product, SHL and/or D had never sought to claim that the SUPER RING Goodwill belonged to SHL/D;

(2)  In 1996 and 2005, when P decided to make changes to the packaging of the Product, SHL had not raised objection on the basis that it owned the SUPER RING Goodwill;

(3)  When P decided in 2004 to remove the SHL House Mark from the packaging of the Product and replaced it with the P’s House Mark, SHL had not objected on the basis that it owned the SUPER RING Goodwill, and instead it objected on the basis that without the SHL’s House Mark, one would not be able to differentiate the Product with the parallel import products;

(4)  Had SHL owned the SUPER RING Goodwill, it would not have voluntarily surrendered the “SUPER RING & Device Mark” (which was made up of the “SUPER RING” word mark and the cartoon character the subject of the P’s Trade Mark B) upon objection raised by P, especially after seeking legal advice from an experienced intellectual property solicitor’s firm;

(5)  Had D (by assignment from SHL) owned the SUPER RING Goodwill, there was no reason for the D not to serve the writ in HCA 1821 of 2009 on the P, and to sue P for passing off on the strength of the SUPER RING Goodwill.

78.In relation to why D decided to give up the SUPER RING & Device Mark, Ms Tam had referred to the cease and desist letter dated 31 July 2009 sent by P’s trade mark attorneys and relevant correspondence in which P’s then complaint was that D had infringed P’s copyright[28](emphasis added).  Ms Tam submitted that was the reason D had voluntarily surrendered as D acknowledged that the rings and the cartoon were not D’s work, and that D did not dispute P owned the copyright to the artwork of the SUPER RING & Device Mark.

79.Who owned/owns the goodwill essentially depends on the facts of each case.  No doubt the alleged inconsistencies will be part of the circumstances the court will consider during the trial.  For the reasons I have said earlier, the matter should go to trial.

80.P had complained that unknown to P, on 8 April 2008, SHL and D had switched names, and that SHL had purportedly transferred its entire import and export trading business to D by way of an alleged oral assignment.  D said the switching of names and assignment of the SHL Business was part of the internal corporate restructuring.  I see no reason to doubt at this stage as to what D had said.

Infringement

81.In the ASOC, P alleged two infringing acts against SHL/D, namely (i) the marketing and sale of D’s SUPER RING Product annexed as Schedule B to the ASOC and (ii) the marketing and sale of a SUPER OOOH product annexed as Schedule C to the ASOC.  As earlier mentioned, P’s O14 Summons was only in respect of (i). 

82.P said it discovered the sale of the D’s SUPER RING Product in about 2008. Cheung had said it sold D’s SUPER RING Product in 2009, but not in 2008 as alleged, and this was because P was in breach of years of practice by failing to supply the Product to D, and he had produced copies of correspondence between P and D and remittance applications from late 2008 to early 2009 to show that P withheld shipment in January 2009 and that D had no choice but to arrange for its PRC factories to manufacture D’s SUPER RING Product which D said he had a right to do and distribute the same in Hong Kong in 2009. 

83.What did not seem to be disputed was that the first cease and desist letter was sent on behalf of P on 31 July 2009, and D had pleaded that it had stopped the sale of its SUPER RING product prior to September 2009.

84.Ms Tam had relied on SBE Licensing v Hyde unrep, HCA 1358/2011, 10.08.2012 and submitted that the alleged use of the infringing signs on D’s SUPER RING Product was but a small and insignificant part of P’s claim when put in context: the alleged use was transitional in nature and spanned a short period of only a few months in 2009 after some 20 years of SHL or its predecessor selling the Product supplied by P, and that such sale of D’s SUPER RING Product had long ceased.

85.Mr Pun submitted that the exact date of the alleged sale of D’s SUPER RING Product was unknown to P, and the full extent of D’s dealing with D’s SUPER RING PRODUCT was not known and that P sought to rely on particulars of any such relevant infringing acts pending discovery and/or interrogatories.

86.I accept at this stage there was not really sufficient evidence as to how long D’s SUPER RING Product had been sold.

87.Ms Tam had, however, submitted that ownership of goodwill is defence to trade mark infringement and that there would be two defences, under s53 (5) (b) and also under s 19(4) of the Trade Mark Ordinance.

88.There will in any event a trial on the alleged infringing act of SHL’s/D’s marketing and sale of the SUPER OOOH product and I have concluded that the issue of the ownership of SUPER RING Goodwill is going to trial.  I am of the view that the alleged infringing act in relation to the marketing and sale of D’s SUPER RING Product should also go to trial.

Order 14 Rule 7

89.Ms Tam submitted that the O14 Summons should be dismissed under Order 14 rule 7.

90.The issue is whether P plainly knew that D had relied on a contention which would entitle it to unconditional leave to defend, thus making the Order 14 procedure not the correct procedure.

91.Mr Pun pointed out that D’s defence originally filed on 6 December 2012 consisted of bare denial that the Super Ring Goodwill was owned or solely owned by P, with no particulars as to who owned the SUPER RING Goodwill, and particulars of the allegation that SHL owned or shared the SUPER RING Goodwill and subsequently transferred the same to D was only first provided in Cheung’s affirmation filed on 11 March 2014.  Mr Pun also pointed out in the Opposition Proceedings, there was no mention of the basis of D alleging to be the owner of the SUPER RING Goodwill, nor of the switching of names between SHL and D, nor that the SUPER RING Goodwill owned by SHL was then purportedly transferred to D.  Further, D’s AD&C was only filed on 23 October 2014.

92.The provisions of Order 14 rules 7 are not mandatory and under that rule, the court may dismiss the summons and award costs to a defendant where a plaintiff has issued his application having been made aware of the contention which would entitle him to unconditional leave to defend.

93.Having considered the above and the circumstances of this case, and the alleged inconsistent past conduct of D, I am of the view that it was not unreasonable for P to proceed with the O14 Summons.  I decline to exercise my discretion to dismiss the O14 Summons and award costs to D under Order 14 rule 7.

Conclusion

94.In light of what I have said above, I grant D unconditional leave to defend.  I will order costs in the cause.  This is a costs order nisi which will be made final after 14 days.

95.Lastly, I would like to thank all Counsel for their assistance to the court.

Mr Dominic Pun, instructed by Anthony Evans & Co, for the plaintiff

Ms Winnie Tam SC and Mr Jason Yu, instructed by LCP, for the defendant