Lin Heung Tea House & Bakery v. Guangzhou Catering Services Enterprises Group Co Ltd
Read the full judgment text of CACV 196/2013 on BabelCite. This Court of Appeal judgment was delivered on 11 May 2015.
53. (5) Subject to subsections (6) and (7), the registration of a trade mark may also be declared invalid on the ground–
Cited by 2 cases · Cites 2 cases
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CACV 196/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 196 OF 2013 (ON APPEAL FROM HCMP NO. 133 OF 2008) ________________________
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________________________ J U D G M E N T ________________________ Hon Cheung JA : I. Background 1.1「蓮香樓」(Lin Heung Lou), 「蓮香茶樓」(Lin Heung Tea House) is a famous restaurant in Hong Kong serving traditional Cantonese cuisine. 「蓮香」(Lin Heung) literally means lotus flagrance. The restaurant has been in operation by the applicants since 1926. The applicants also operate a bakery business selling cakes and pastries such as「月餅」(mooncakes), 「老婆餅」(wives’ cakes) and「嫁女餅」(wedding cakes) under the marks of「蓮香」(Lin Heung),「蓮香月餅」(Lin Heung Mooncake),「蓮香老餅家」(Lin Heung Old Cake Shop) and「香港蓮香老餅家」 (Hong Kong Lin Heung Old Cake Shop). Of the applicants’ bakery products, the best known items are the different types of mooncakes. Every year before the Mid-Autumn Festival, the applicants advertise their mooncakes by outdoor advertisements and circulars to the public under the mark and device of「蓮香月餅」(Lin Heung Mooncake). On the face of each mooncake are also embossed the Chinese characters「蓮香月餅」. This has been the practice for the last 80 years. The applicants’ name is often shortened to「蓮香」(Lin Heung). 1.2The applicants also export mooncakes to its distributors in the USA and Canada every year before the Mid-Autumn Festival. They have registered the mark and device「蓮香月餅」(Lin Heung Mooncake) in Canada and the USA on 20 December 1991 and 12 July 1994 respectively. 1.3The applicants also sell other kinds of cakes and pastry under these marks at their premises. Over the years they have acquired and maintained a high reputation for their products among the public in Hong Kong. 1.4.In 2006 the applicants applied for registration of 「蓮香樓」and 「蓮香」for class 30 goods/services. The mark of「蓮香樓」was also sought to be registered in other classes appropriate for the tea house and restaurant business. The two marks are as follow :
1.5However, the Registrar of Trade Marks rejected the application because the Chinese characters「蓮香」have already been registered as a trade mark by the respondent, a Mainland company in Guangzhou (廣州) (‘the suit mark’). The registration was first obtained by「廣州蓮香樓」(Guangzhou Lianxiang Lou) (‘GZ Lianxiang’) in 1996. The name ‘Lin Heung’ and ‘Lianxiang’ are the same transliteration of 「蓮香」under Cantonese and Putonghua respectively. 1.6The respondent’s suit mark is as follows :
1.7The respondent was assigned the suit mark in 2006. 1.8The applicants commenced the present action in 2008 seeking a declaration that the suit mark is invalid and also its revocation. Louis Chan J rejected the revocation application but gave judgment for the applicants declaring the registration of the suit mark is invalid under sections 53(5)(b) and 12(5) of the Trade Marks Ordinance(Cap. 559) (‘TMO’). The respondent now appeals against the decision. II. History of the Lin Heung Tea House 2.1Although the applicants set up the Lin Heung Tea House in Hong Kong in 1926, its history went back earlier in Guangzhou in the Mainland. GZ Lianxiang was founded in 1910 in Guangzhou. Ngan Yee Chi was one of its founders. 2.2Ngan Yee Chi together with 70 other shareholders of GZ Lianxiang founded the applicants’ tea house business in Hong Kong under the trade name of「蓮香茶樓」(Lin Heung Tea House). According to the Business Registration application, Lin Heung Tea House formally commenced business on 27 October 1928. C F Ngan is one of the grandsons of Ngan Yee Chi and is now the manager of the applicants. 2.3GZ Lianxiang was founded to take over a bakery business originally called「連香樓」, the name of which was changed to「蓮香樓」due to the excellence of its cakes and pastries made of lotus seed paste. It was and still is also dubbed [蓮蓉第一家] (the first and foremost house of lotus paste). 2.4GZ Lianxiang marketed in Guangzhou its mooncakes with lotus seed paste filling in a square packaging box. It was a paper box at its inception instead of a metal container. The box has a distinct presentation of the suit mark and the Guangzhou addresses of GZ Lianxiang on the cover. There are also descriptions on two of the sides of the box indicating that the mooncakes are of GZ Lianxiang. 2.5GZ Lianxiang was nationalized in 1957 and became a state-owned company. Since then, GZ Lianxiang and the applicants have no common partner, connection or interflow. 2.6The applicants have sold their mooncakes in Hong Kong under and by reference to the trade name of「蓮香」and a mark which is the same as the suit mark. Throughout the years the applicants use a packaging to sell their mooncakes which is almost identical to the packaging used by GZ Lianxiang. The difference is that the applicants’ box cover clearly states its Hong Kong address. The sides of the applicants’ box are also very similar to the GZ Lianxiang box except that they state the applicants as the maker of the mooncakes. The applicants also promote its mooncakes by reference to [蓮蓉第一家] (the first and foremost house of lotus paste). 2.7On 18 September 1995, GZ Lianxiang applied for registration of the suit mark in the United States and the application was granted on 14 July 1998. 2.8On 12 June 1996, GZ Lianxiang applied for registration of the suit mark in Hong Kong and the application was subsequently granted. 2.9On 20 January 1998, GZ Lianxiang obtained registration of the word mark「蓮香樓」 for the United Kingdom, France and Germany under the Madrid Agreement and Protocol. 2.10Guangzhou Lianxiang Lou Company Limited (‘GZ Lianxiang Ltd’) was incorporated on 20 July 2005 to take over the business of GZ Lianxiang. GZ Lianxiang Ltd was privatized in 2006 and a private entity「廣州市西關世家園林酒家有限公司」acquired 99% of its shares. 2.11The registration of the suit mark was assigned to the respondent on 9 October 2006. III. Sale of GZ Lianxiang mooncakes in Hong Kong 3.1The respondent claimed that they had been exporting GZ Lianxiang mooncakes to Hong Kong through an importer Cheung Hop Ltd and its predecessor (‘Cheung Hop’). The mooncakes were initially sold under the Pearl River Bridge (‘PRB’) brand. The significance of the PRB brand is discussed in Guangdong Foodstuffs Import & Export (Group) Corp & Another v Tung Fook Chinese Wine (1982) Co Ltd & Another [1999] 3 HKLRD 545, namely, from its establishment in 1949 and until the introduction of the open door policy in the 1980s, Mainland China vigorously adopted a centralized planned economy. The export of foodstuffs was vested in a central corporation with branches in the provinces which handled the import and export of foodstuffs of the provinces. The food products of the Guangdong province were sold with a common ‘Pearl River Bridge’ (「珠江橋牌」) trade mark during this period of time. 3.2Since 1984, GZ Lianxiang broke away from the PRB brand and exported its own brand of mooncakes to Hong Kong. The GZ Lianxiang mooncakes were sold at various Chinese emporiums and supermarkets. Most of them were not upmarket outlets. 3.3Although the applicants claimed that GZ Lianxiang had only sold their mooncakes in Hong Kong under the PRB brand, the Judge when dealing with the applicants’ revocation application based on non genuine use of the suit mark for three years (which he ruled against the applicants) found at paragraph 64 that the GZ Lianxiang mooncakes were sold under the suit mark since 1999 at the latest until October 2006. However, when dealing with the issue of honest concurrent use, the Judge found at paragraph 73 that the GZ Lianxiang mooncakes had been sold in Hong Kong under the suit mark since 1984. In the Court below, the respondent accepted that there were no GZ Lianxiang mooncakes for sale in Hong Kong since 2007. IV. The statutory framework 4.1Mr Yan SC, counsel for the respondent, has very helpfully outlined the statutory framework for the refusal of registration of a trade mark and its subsequent removal after registration. 1) Refusal of registration 4.1.1The grounds upon which an application to register a trade mark may be refused are set out in sections 11 and 12 of the TMO. The ‘absolute grounds for refusal’ are set out in section 11, such as the mark does not satisfy the requirement of a trade mark or the registration was made in bad faith (section 11(5)(b)). The ‘relative grounds for refusal’ are set out in section 12, such as the trade mark being identical to an earlier mark (section 12(4)) or any earlier unregistered mark is protected by the law of passing off (section 12(5)). 4.1.2However, section 13 of the TMO provides that :
4.2The statutory regime is thus that even if any of the relative grounds for refusal of registration provided for under section 12 are made out as against any application for registration of a trade mark, if the Registrar or the Court is satisfied that there has been honest concurrent use of the mark sought to be registered and the earlier trade mark giving rise to the relative ground(s) for refusal of registration, the trade mark for which registration is applied for may nevertheless be registered. However, if any of the absolute grounds for refusal of registration are made out as against an application for registration of a trade mark, the provisions of section 13(1) cannot avail the applicants for registration. 2) Post-Registration 4.3.1After a trade mark has been registered, the TMO provides for various grounds upon which the registration may be attacked. In the context of the present case, the relevant provisions are sections 52(2)(a) (revocation based on non-use), section 52(1)(c) (revocation on the ground that in consequence of the use made of it by the owner or with his consent, the registered trade mark is liable to mislead the public), section 53(3) (declaration of invalidity on the ground that the trade mark was registered in contravention of section 11 (absolute grounds for refusal of registration)) and section 53(5)(b) (declaration of invalidity on the ground that there is an earlier right in relation to which the condition set out in section 12(5) (relative grounds for refusal of registration) is satisfied). 4.3.2Further, in the same way in which section 13 of the TMO provides that the relative grounds for refusal of registration provided for under section 12 may be overcome by proof of honest concurrent use, section 53(7) provides that an application for declaration of invalidity based on a relative ground for refusal of registration may be defeated by proof of honest concurrent use :
V. Honest concurrent use 1) The proceedings below 5.1In the Court below, the applicants relied on many grounds to attack the suit mark but only succeeded on one ground, namely, the use of the suit mark, as at the deemed date of registration of 12 June 1996, was liable to be prevented by the law of passing off under section 12(5)(a) and should be declared invalid under section 53(5)(b) (‘passing off ground’). The relevant provision are :
5.2The respondent relied on the defence of honest concurrent use in the Court below. To that defence, the Judge accepted the applicants’ submission that if GZ Lianxiang had built up a reputation, it is not a reputation in the suit mark simpliciter, but in the suit mark in conjunction with the geographical designation of「廣州」(Guangzhou) or the name of「廣州蓮香樓」(Guangzhou Lianxiang Lou). He rejected the respondent’s defence of honest concurrent use by holding that the mere use by GZ Lianxiang on 12 June 1996 of the suit mark simpliciter for sale of mooncakes in Hong Kong would have led to confusion of whether such mooncakes were of the applicants. 2) Concessions by the respondent 5.3In the Court below the respondent accepted that for the purpose of the law of passing off, the applicants have goodwill in their trade marks. It also accepted that the trade marks of the applicants are well-known trade marks in Hong Kong within the meaning of section 4 of the TMO. The respondent was prepared to consent to the applicants’ applications to register their trade marks as concurrent trade marks. 5.4Mr Yan SC renewed the respondent’s concession on concurrent registration even if the respondent is successful in its appeal. 3) The respondent’s appeal 5.5Initially the respondent’s notice of appeal also challenged the Judge’s finding on the passing off ground but Mr Yan has now focused the appeal solely on the Judge’s rejection of their defence of honest concurrent use. Mr Yan submitted that the Judge was wrong for two reasons : 5.5.1He was wrong to hold that the mere use by GZ Lianxiang of the suit mark simpliciter would have led to confusion and relied on it in support of his holding that there had not been honest concurrent use. 5.5.2He was wrong to hold that the use of the suit mark by GZ Lianxiang was not a use of the suit mark simpliciter. 4) The tests in Re CSS Jewellery Co. Ltd. 5.6The case of Re CSS Jewellery Co. Ltd. [2010] 2 HKLRD 890 is relied upon by Mr Yan in support of his case. The facts of the case are adequately set out in the head note of the judgment which I will adopt. For ease of reading, I will set out the facts in separate paragraphs : 5.6.1X [CSS Jewellery Co Ltd] applied to register the trade mark ‘CHOW SANG SANG’ (‘the Subject Mark’) for jewellery goods and services under classes 14 and 35. 5.6.2The Registrar [of Trade Marks] refused under section 12(3) of the TMO on the basis of the prior registration by Y [Chow Sang Sang Jewellery Co Ltd] in class 14 of the mark ‘A CORPORATE GIFT IDEA BY CHOW SANG SANG’ arranged in an oval, with the word ‘GOLD’ and the Chinese character「金」in bigger fonts in the centre. 5.6.3X and Y were owned or controlled by two branches of the same family, respectively comprising or originating from: (a) the sons of F and his wife (‘the Brothers’); and (b) the sons of F and his concubine (‘the Half-Brothers’). 5.6.4The Brothers had set up a jewellers and goldsmiths company in 1934 with capital provided by F, which used the trade name ‘Chow Sang Sang’ and its equivalent in Chinese「周生生」. 5.6.5In 1943, F made an inter vivos settlement of his assets amongst the two branches, with the Brothers taking up the Zhanjiang and Hong Kong shops and the Half-Brothers taking over the Macau shop. 5.6.6F’s will provide that all his descendants could use the name「周生生」. 5.6.7Since then, both branches had set up further shops in Hong Kong using the names「周生生」and ‘Chow Sang Sang’ as integral and distinctive parts of their business names. 5.6.8Both businesses were extremely successful. 5.6.9The Registrar further refused to allow registration of the Subject Mark on the ground of honest concurrent use under Section 13(1)(a), under which a trade mark could be registered notwithstanding a refusal under section 12. X appealed. 5.7Andrew Cheung J (as he then was) allowed X’s appeal and ordered the application for registration be accepted by the Registrar. He held section 13(1)(a) entails a two-stage determination : 5.7.1whether there has been an honest concurrent use of the Subject Mark and the earlier trade mark; 5.7.2if the answer is in the affirmative, whether after considering all relevant circumstances, including public interest, the Registrar’s discretion should be exercised to accept the application for registration of the mark, despite the fact that the use of the mark in relation to the goods or services in question ‘is likely to cause confusion on the part of the public’ (paragraph 35). 5.8He then elaborated on the requirements of each of the two stages :
5) Evidence of honest concurrent use 5.9Mr Yan submitted that if the Judge had properly considered Re CSS Jewellery Co. Ltd. and the evidence of the use of the suit mark by the respondent, he should have found and held that there had been honest concurrent use of the suit mark by GZ Lianxiang for the following reasons : 5.9.1The Judge himself held that the GZ Lianxiang mooncakes had been sold in Hong Kong under the suit mark since 1984. These mooncakes were packaged in the packaging boxes. There had accordingly been 12 years’ use of the suit mark by the date of application for the registration of the suit mark. This was a sufficiently lengthy period of concurrent use for the purposes of satisfying section 13. As noted in the Trade Marks Registry Work Manual, Consent, honest concurrent use and other special circumstances, at page 7, five years’ concurrent use is generally sufficient. This has also been confirmed in numerous decisions of the Registrar of Trade Marks. 5.9.2Just as the Court held in Re CSS Jewellery Co. Ltd., in the light of the historical background in the present case, the honesty of the concurrent use cannot be questioned. Indeed, the historical background in the present case is even more favourable and compellingly in favour of a finding of honesty as GZ Lianxiang was clearly the originator and earlier user of the suit mark and the applicants were only subsequently set up by a group of shareholders of GZ Lianxiang. 5.10Mr Yan submitted that the Judge should have found that there had been use by the respondent of the suit mark simpliciter and as a trade mark : 5.10.1The most prominent and extensive use of the suit mark was on the cover of the packaging box of GZ Lianxiang’s mooncakes. There, the suit mark was printed and embossed alongside the words「月餅」(mooncake). This was clearly use of the suit mark simpliciter and as a trade mark because the words「月餅 」(mooncake) are non-distinctive but merely descriptive of the contents of the box. 5.10.2This is also true of the use of the suit mark in the tagline「蓮香餅好月團圓」(Lianxiang Good Cake, Mid Autumn Moon) on one side of the box. The only distinctive element of that tagline is the suit mark. 5.10.3On another side of the box, the suit mark was used as part of the trading name「廣州蓮香老餅家」(Guangzhou Lianxiang Old Cake Shop). This also constituted use of the suit mark simpliciter and as a trade mark as the words「廣州」 (Guangzhou) and「老餅家」(Old Cake Shop) are purely descriptive. 5.10.4On yet another side of the box, it appears that the suit mark was used as part of the trading name「廣州蓮香樓」 (Guangzhou Lianxiang Lou). This also constituted use of the suit mark simpliciter and as a trade mark as the words「廣州」(Guangzhou) and「樓」(Lou) are purely descriptive. 5.10.5On the cover of the packaging box, there is the name「蓮香樓」(Lianxiang Lou). This too constituted use of the suit mark simpliciter and as a trade mark as the word「樓」(Lou) is purely descriptive. 6) Stage 1 Honest concurrent use (6.1) The prerequisite requirement 5.11Mr Anson Wong SC for the applicants does not dispute the two-stage approach in Re CSS Jewellery Co. Ltd. However, he pointed out that as the first stage inquiry is focused on three matters, namely, use, concurrent use and honesty of the concurrent use, the last matter is in fact a prerequisite to the Court exercising its discretion under the second stage of allowing a mark to be registered on the ground of honest concurrent use. Fox J in Bali Trade Mark (No. 2) [1978] FSR 193 at 220 stated that :
5.12This approach was followed in Hong Kong in Lam Soon Marketing Services v. Lam Mei Hing [1994] 3 HKC 414. 5.13In determining the honesty of the concurrent use, it is ‘commercial honesty, which differs not from common honesty, that is the criterion’ : Re Parkington & Co Ltd’s Application (1946) 63 RPC 171 per Romer J at 182-183. 5.14Mr Wong pointed out in considering the issue of commercial honesty, the knowledge of the party seeking to rely on the ‘honest concurrent use’ defence of (1) the existence of an earlier mark, (2) the likelihood of confusion with such an earlier mark, and (3) the need to use some safeguards to avoid confusion are clearly matters which are relevant to the issue regarding honesty of the concurrent use under stage (a) of the determination : Re Parkington & Co Ltd’s Application at 183; Bali Trade Mark (No. 2) at 220-221. 5.15Mr Wong submitted that the Judge has made the following important findings : 5.15.1GZ Lianxiang was fully aware of the applicants’ presence and use of the trade mark in Hong Kong; 5.15.2When GZ Lianxiang’s mooncakes were sold in Hong Kong, the price lists and packaging all stated prominently that such mooncakes were of GZ Lianxiang from Guangzhou, but not those of the applicants from Hong Kong; 5.15.3The suit mark was used in conjunction with「廣州」(Guangzhou) or「廣州蓮香樓」(Guangzhou Lianxiang Lou), or the GZ Lianxiang’s Guangzhou address to avoid confusion and to distinguish the respondent’s mooncakes from those of the applicants. 5.16Accordingly, Mr Wong submitted that that the knowledge of GZ Lianxiang to 1) such likelihood of confusion and 2) the attempt to avoid such confusion by using the suit mark in conjunction with other indicia are clearly relevant to the question of honesty of concurrent use of the suit mark at the first stage inquiry. (6.2) Relevance of knowledge 5.17In my view, Mr Wong’s submission on the prerequisite requirement of ‘honest concurrent use’ at the first stage of the inquiry is well founded. In order to determine whether the concurrent use is honest or not, the state of knowledge of the user is clearly relevant. However, it has to be stressed that not every knowledge of the existence of an earlier mark or the likelihood of confusion with such an earlier mark or the need to use some safeguards to avoid confusion will render the use dishonest. Analogy may be made of the relevance of knowledge in the bad faith context. Arnold J in Hotel Cipriani Srl and others v Cipriani (Grosvenor Street) Ltd and others [2009] Bus LR Digest D81 at D90 was of the view that merely because a party knows that third parties are using the same mark in relation to identical goods or services does not constitute bad faith, let alone where the third parties are using similar marks and/or are using them in relation to similar goods or services. More recently in Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth Gmbh [2009] E.T.M.R. 56 the Court of First Instance of the European Communities (First Chamber) repeated the same view :
5.18In this case it would really turn what the respondent had done in respect of its packages in order to avoid confusion with the applicants’ trade mark on its head if they are to be treated as evidence of dishonesty. 5.19Mr Wong further supports the Judge’s view on dishonesty by submitting that while the respondent had in their packages used geographical and other descriptions to distinguish their goods from that of the applicants, it had only registered the「蓮香」 suit mark without such other descriptions. In my view this submission does not carry the matter further because the issue is of the honesty of the concurrent use and not honesty of the registration which has never been in issue. 5.20In this connection it is of note that in Re CSS Jewellery Co. Ltd., that the concurrent use of the mark was an honest one was not an issue in that case. The discussion there on the first stage inquiry is whether the ‘Chow Sang Sang’ mark was used by the applicant when very often it was used together with「粵港澳湛周生生」. The Judge there held that ‘such use does not detract from the fact that during that period the applicant has used ‘Chow Sang Sang’ as a mark, a badge of origin of its goods.’ (6.3) Use of suit mark simpliciter 5.21As to the Judge’s holding in the present case that the respondent’s use of the suit mark since 1984 was in conjunction with the words「廣州」(Guangzhou) or「廣州蓮香樓」(Guangzhou Lianxiang Lou) and was not a use of the suit mark as a trade mark simpliciter and therefore there was no honest concurrent use, I have to say the Judge was wrong on his view. The term trade mark simpliciter is not a legal term. All that it means is that the trade mark is not used on its own but in connection with other marks or descriptions. But it does not mean that the suit mark had not been used as a trade mark. The use of trade mark in combination with other descriptions, the purpose of which is to avoid confusion, cannot be regarded as evidence of dishonesty. (6.4) Conclusion on honest concurrent use in Stage 1 5.22For the reasons I have given, in my view, what the respondent did in fact points to honest concurrent use of the suit mark in the first stage consideration. 7. Stage 2 Discretion (7.1) Point not addressed below 5.23Because the Judge found against the respondent on honest concurrent use, he did not deal with the second stage inquiry of whether there should be registration despite the fact that likelihood of confusion will be caused if there is use of the mark in relation to the goods in question. This Court has to consider the exercise of discretion afresh. (7.2) Discretionary considerations 5.24I have already set out the discretionary considerations identified by Andrew Cheung J in Re CSS Jewellery Co. Ltd. He further held that :
(7.3) The respondent’s case 5.25Mr Yan submitted that the Judge should have exercised his discretion against declaring the registration of the suit mark invalid by reason of the honest concurrent use thereof by GZ Lianxiang : 5.25.1There had been lengthy and extensive honest concurrent use of the suit mark. Before the market in mooncakes became fiercely competitive and a number of the Chinese emporiums which had been the retail outlets through which GZ Lianxiang’s mooncakes were sold had ceased business, the sales of the GZ Lianxiang mooncakes under and by reference to the suit mark had been substantial. 5.25.2On the issue of likelihood of confusion, as the facts of the present case are closely analogous to those in Re CSS Jewellery Co. Ltd., an approach similar to that adopted by the Court in that case should be adopted in the present case. Thus, the likelihood of confusion must be considered against the background of the reduced significance of this factor under the new law. Further, given the historical background, the risk of confusion has always existed and what is more pertinent is whether there had been an increase in the risk of confusion after and by reason of the registration of the suit mark. This question must be answered in the negative because the Judge had himself found that consumers who bought the GZ Lianxiang mooncakes knew that they were buying mooncakes made by GZ Lianxiang and not those made by the applicants. 5.25.3There is no evidence of any incidents of confusion having occurred. 5.25.4Save and except the citation of the suit mark against the applicants’ trade mark applications, no inconvenience or prejudice had been caused to the applicants throughout the lengthy period during which the suit mark had been registered. GZ Lianxiang had never sought to enforce its rights under the registration of the suit mark against the applicants. With regard to the citation of the suit mark against the applicants’ trade mark applications, this is an inconvenience which can easily be overcome by the respondent consenting to the applicants’ application. 5.25.5Conversely, in view of the clearly hostile attitude of the applicants, if the registration of the suit mark is declared invalid, the applicants’ trade mark applications may proceed to registration and, upon securing such registration, the applicants may institute trade mark infringement proceedings against GZ Lianxiang which would no longer be able to rely on the defence under section 19(2) of the TMO which would otherwise have been available to it. The effect of the loss of the defence under section 19(2) would not simply mean that GZ Lianxiang would need to change its packaging. It would potentially mean that GZ Lianxiang would most unfairly lose its right to use the name and mark「蓮香」in Hong Kong when it, rather than the applicants, was the originator of this name and mark. 5.25.6As in Re CSS Jewellery Co. Ltd., the historical background is highly pertinent and is a very important factor which weighs against the exercise of the discretion to invalidate the registration of the suit mark. 5.25.7The parties had reached an agreement in 2000. This agreement was not that GZ Lianxiang would cease to make use of the name and mark「蓮香」in the USA but rather GZ Lianxiang would cease to use a particular packaging design. However, GZ Lianxiang was free to continue to use the name and mark「蓮香」. This was confirmed by C F Ngan in his oral testimony. Accordingly, the effect of the agreement is that both the applicants and GZ Lianxiang are free to market and sell their products under and by reference to the name and mark「蓮香」in the USA. Further, both the applicants and GZ Lianxiang have trade mark registrations comprising the mark「蓮香」in the USA. One of those registrations is for a mark identical to the suit mark. The applicants have never explained why it is prepared to accept coexistence on the USA market and concurrent registrations in the USA Trade Marks Registry but not in Hong Kong. (7.4) The present case 5.26In my view, however, having considered the following factors, the discretion should be exercised in favour of the applicants and against the respondent in order to protect the distinctive character and repute of the applicants’ mark from unwarranted confusion or dilution. 5.26.1The Judge has found that the applicants are the owner of a well-known trade mark「蓮香」in Hong Kong. For over 80 years the「蓮香」brand has been a well-known local brand associated with the applicants’ restaurant and mooncakes. This is clearly a significant fact to be taken into account in favour of the applicants. By contrast GZ Lianxiang’s products bearing the suit mark only entered the market in 1984 and remained here only up to 2006. This by itself is not a short period but not so when compared with that of the applicants in the balancing exercise. 5.26.2The mere fact that GZ Lianxiang was the originator of the suit mark or that it has been using the suit mark for decades in the Mainland or other jurisdictions bears little weight. Goodwill is territory-specific. There was no interflow between the parties since 1957. There is a huge gap of time between at least from 1957 (if not earlier) and 1984 when the respondent’s products reappeared in the Hong Kong market. In this period, the applicants have built up its distinct reputation on the「蓮香」(Lin Heung) trade mark in the local market. The 「蓮香」(Lin Heung) products are associated with that of the applicants rather than a cake shop in Guangzhou. This factor must be properly recognized despite the fact that the mark originated first in Guangzhou. 5.26.3Although once honest concurrent use has been shown, the respondent’s knowledge of the applicants’ trade mark loses much of its significance, nonetheless it remains a matter not to be wholly overlooked in the balancing exercise. Fox J in Bali Trade Mark (No. 2) in his discussion on the honesty of the user applied the view of Lord Tomlin in Pirie’s Application (1933) 50 R.P.C. 147 and held at 159 :
5.26.4The respondent’s use of the suit mark in terms of time and quantity is clearly a relevant consideration by reference to Re Pirie’s Application and adopted in Re CSS Jewellery Co. Ltd. In my view a significant factor against the respondent in the balancing exercise is that the suit mark was only used in the local market in the relatively short period between 1984 and 2006 (as compared to that of the applicants’ use) and has not been used in Hong Kong since 2007. By the time of the trial before the Judge, five years had lapsed since the respondent’s last use of the suit mark. Even before that, the sale of the respondent’s mooncakes in Hong Kong had been dwindling to a very low figure. This is what the Judge had summarized from the respondent’s evidence at paragraph 39 of the judgment :
5.26.5Mr Yan’s submission that the respondent had not stopped the use in 2006 must be rejected. This issue had been ruled upon by the Judge at the trial. In the meantime, the applicants continue with the use of their trade mark by the sale of their mooncakes locally. Even according to Mr Yan’s calculation, based on a local sale of 30,000 mooncakes per year, the annual sales figure is a significant $3.6 million. 5.26.6The significance of the lack of use by the respondent of the suit mark is that, in terms of the factor of relative inconvenience if the discretion is exercised against the respondent, it will suffer relatively little inconvenience. No real prejudice will be caused to the respondent. 5.26.7I agree with Mr Wong that the absence of evidence of actual confusion carries no or very little weight. This is because such confusion was avoided in the past by the respondent deliberately using the suit mark in conjunction with the words such as 「廣州」 or 「廣州蓮香樓」. Such confusion, however, would arise if the respondent is permitted to use the suit mark simpliciter based on the present registration. The respondent has given an undertaking that it will continue to use the geographical and other descriptions with the suit mark in order to avoid confusion. This is, of course, a relevant factor to be considered but not enough to have the discretion exercised in its favour. 5.26.8As to the threat of infringement proceedings by the applicants if their trade mark is registered and the loss by the respondent of their section 19(2) defence, namely,‘a registered trade mark is not infringed by the use of another registered trade mark in relation to goods or services for which the latter is registered….’, this is more apparent than real because the respondent has not exported mooncakes to Hong Kong since 2007. Mr Wong is correct when he submitted that practically speaking there is little risk of any infringement proceedings by the applicants. There is no serious prejudice caused to the respondent if it is required to change the packaging as a result of the suit mark being declared invalid. This has happened in the North American market pursuant to the parties’ settlement agreement in 2000. There is no suggestion of any real prejudice caused to the respondent as a result of such change of packaging. Mr Wong submitted that even after the suit mark is declared invalid, the respondent may be able to obtain new registration of the marks「廣州蓮香」or「廣州蓮香樓」or some other composite marks which the respondent has honestly used in Hong Kong. In any event that the respondent has to stop using the suit mark is a natural consequence of the Court declaring the registration invalid. 5.26.9What the parties had agreed upon in respect of the respective use of their trade mark in USA is not a reason for exercising the discretion in favour of the respondent. Whatever may be the position for the USA market, the important feature in this case is that since 1926 the applicants have built up the goodwill of the「蓮香」mark in Hong Kong and this is what they seek to protect by applying for the registration of that mark. 5.27As the respondent has failed to have the Stage 2 discretion exercised in its favour, it fails to satisfy the defence of honest concurrent use to the applicants’ challenge. VI. Bad faith 6.Although Mr Wong initially in his written submission contended that the declaration of invalidity of the suit mark is also justified on the ground that the registration was made in bad faith, he decided not to pursue this point on appeal. VII. Conclusion 7.The appeal is dismissed with costs nisi to the applicants. Hon Yuen JA : 8.I agree. Hon Chu JA : 9.I agree with the judgment of Cheung JA.
Mr Anson Wong SC, instructed by William Sin & So, for the applicants Mr John Yan SC and Mr Eric Chow, instructed by C. L. Chow & Macksion Chan, for the respondent |
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