The Intellectual Property Department has recently issued a consultation paper titled "Intellectual Property and Unfair Competition". One of the issues that this paper deals with is unfair competition in cyberspace. The paper calls for comments on whether the public is content with the existing legal framework or whether we feel that a comprehensive statute that deals with unfair trade practices is required in Hong Kong.

It is a requirement of the Paris Convention and the TRIPS Agreement that all signatories ensure that there is adequate protection against unfair competition in their jurisdictions. In Hong Kong such protection is currently provided under a mixed bag of common law torts and statutes which include passing-off, defamation, trade libel, the Trade Marks Ordinance and the Trade Descriptions Ordinance. The Hong Kong Government is considering whether the intellectual property regime in the region could be enhanced by codifying the legal principles on unfair competition.

In respect of unfair competition in cyberspace, the paper looks at cybersquatting and notes that trade mark proprietors can take passing-off and trade mark infringement actions against parties who register domain names in bad faith. The paper outlines online arbitration as a possible option for dealing with cybersquatters as well as looking at various court decisions. However, much has been said and reported about domain name dispute resolution procedures elsewhere and the paper does not say anything new in this respect.

Perhaps more interestingly, the paper also seeks to address issues relating to unfair trade practices in web design. The particular examples of potentially unfair practices that are referred to are:

  • creating hyperlinks to other websites which mislead the reader as to who owns the content of the linked site;
  • creating deeplinks into other websites which avoid the advertising or password protection devices on the homepages of the linked site;
  • framing a webpage from another website in such a way that the reader is misled as to who owns the content of the framed site; and
  • using metatags to mislead readers or web gateways about ownership of content.

Case law on such matters has predominantly emanated from the United States where the Lanham Act provides the statutory framework in respect of unfair trade practices at a federal law level. However the divergence in the attitude of the courts in respect of whether hyperlinking, deeplinking and framing amount to unfair competition show that even with a codified law it is difficult to generalise in such matters and each case will turn on the facts. The view expressed in the paper is that "there is jurisprudence to support the inference that& linking, metataging and framing with the intention to pass off or free ride on the reputation and intellectual effort of others is likely to amount to infringement of intellectual property rights".

The government paper does not express any overall view as to whether it is in favour of an unfair competition law, rather it invites the public and relevant industry sectors to submit comments by 1 May 2001. It is of course early days yet, too early to predict whether an unfair competition law will ever be passed in Hong Kong.

Packaged software: customers beware!

The UK case of Winther Brown & Co Ltd v BML (Office Computers) Limited has indicated a significant shift in the balance of responsibilities between customers and software suppliers. Previously the legal obligations fell almost exclusively on the supplier and the customer was in a strong position if its requirements were not met. However the judge in this case emphasised that the design and installation of a packaged software system requires the active cooperation of both parties.

The decisions in this case makes it clear that when a customer purchases a packaged software system and engages the supplier in modifying the system to fit its specific requirements, the customer will have more than just a duty to state what he wants the system to achieve. The judge held that a term can be implied in contracts for the supply of a standard packaged software system that the customer should:

  • communicate clearly any special needs to the supplier;
  • take reasonable steps to ensure that the supplier understands those needs; and
  • devote reasonable time and patience to understanding how to operate the system.

This case is important because it recognises the complex relationship which often exists between customers and suppliers of packaged software systems. It is essential that purchasers realise that they also have to fulfil certain obligations when engaging software suppliers in the implementation of their systems.

First published in E-lawasi@ in December 2000.



Matthew Laight

China and Hong Kong

Call me on: +852 2248 6000