Hong Kong chapter of World Trade Review Anti-counterfeiting Guide 2008

18 November 2008

Ai-Leen Lim


Legal framework

The IP legal regime in Hong Kong is well established and very similar to those of other modern and highly sophisticated economies such as the United Kingdom, Singapore and Australia. The IP laws of Hong Kong continue to be based on English legislation despite the change of sovereignty resulting from the handover of Hong Kong back to the People’s Republic of China on July 1 1997; the common law will continue to be applicable until at least 2047 on the basis of the ‘one country, two systems’ policy.

Hong Kong is a member of the World Intellectual Property Organization and a signatory to most of the important IP treaties, including the Paris Convention for the Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights.

The two main statutes that govern the protection and enforcement of trademark rights in Hong Kong are the Trademarks Ordinance and the Trade Descriptions Ordinance. The latter protects consumers against false trade descriptions (which are defined as including trademarks under the ordinance) and false applications of trademarks registered in Hong Kong.

Although there is no anti-competition or anti-dilution legislation in Hong Kong, the owner of an unregistered trademark may be able to prevent others from using its mark based on the common law tort of passing off. In order to succeed in such an action, the unregistered trademark owner must show that:

  • it has acquired a reputation in relation to that trademark (usually by virtue of long and/or substantial use of the mark);
  • there has been a misrepresentation in relation to that trademark (by the defendant); and
  • as a result of such misrepresentation, it has suffered or is likely to suffer damage.

There are two main methods of IP enforcement in Hong Kong:

  • enforcement through the Customs and Excise Department (which may lead to criminal prosecutions led by the Department of Justice); and
  • litigation before the courts (in respect of civil disputes).

We deal with these in turn in the paragraphs below, insofar as they relate to trademark and brand owners’ rights.

Border measures

One of the key roles of Customs is the protection of the interests of IP rights owners in Hong Kong. Customs is made up of five branches, one of which is the Intellectual Property Investigation Bureau, which, as its name suggests, is focused on IP enforcement matters.
Generally speaking, before Customs will take on an enforcement case, it is necessary for the relevant brand owner to register its rights and then file a complaint in respect of each particular case of infringement. (In Hong Kong, unlike in China, only trademark rights and copyrights may be registered with Customs.

The relevant registration involves the submission of a standard form to Customs which contains the following:

  • information on the trademark owner’s rights, such as a copy of the certificate of registration and certificate of renewal;
  • information on the identity of the registrant, such as its proprietor’s incorporation certificate;
  • details of the authorized licensees/manufacturers of the relevant products in Hong Kong and elsewhere (where applicable);
  • information on the goods which are sold or offered for sale under the relevant trademark;
  • current information on the manufacture, network of distribution and authorized use/licensing of the trademark owner’s products in Hong Kong and elsewhere;
  • the designation of an expert examiner appointed by the trademark owner who would be in a position to assist in inspecting and verifying the authenticity of any products seized pursuant to a raid (it is usual for Customs to request a meeting with the examiner designated by the trademark owner prior to his or her formal appointment to ascertain his or her qualification to act as an expert on the authenticity of the goods concerned); and
  • a letter of authorization issued by the trademark owner vesting the said examiner with the authority to act on its behalf in future cases led by Customs.

Customs has wide powers of search and seizure, powers of arrest and discretion on whether to prosecute an infringer. Hence, the powers of Customs in Hong Kong exceed those of customs departments in other regions/countries, as Customs carries out all of the above procedures without encountering bureaucratic conflict with other government departments. It can seize counterfeit goods from anywhere in Hong Kong and not just in harbour or border areas.

The Organized and Serious Crimes Ordinance confers extensive powers in certain appropriate circumstances on law enforcement officers (police and customs officers) for search and investigation in IP enforcement, including trademark infringement matters.

Criminal prosecution

The Trade Descriptions Ordinance contains criminal sanctions in respect of offences relating to false trade descriptions, trademark forgery and false application of trademarks registered in Hong Kong. Under the ordinance, any person who forges any trademark or falsely applies to any goods any trademark or any mark so nearly resembling a trademark as to be calculated to deceive commits an offence unless he or she proves that he or she acted without an intention to defraud. It is also an offence to sell or expose, or have in one’s possession for sale or for any purpose of trade or manufacture, goods to which any forged trademark is applied, or to which any trademark or mark so nearly resembling a trademark as to be calculated to deceive is falsely applied.

Customs comes across trademark infringements in the course of its duties and will act on them in appropriate circumstances. On the other hand, trademark owners may voluntarily file formal complaints to notify Customs of any alleged infringements. In all such cases, Customs will require the trademark owner to provide evidence to prove its ownership of the trademark, as well as evidence to prove the alleged infringement. In such cases, the trademark owner should:

  • apply to have its trademark rights recorded (as discussed above);
  • provide evidence of the subsistence and ownership of the right (eg, a certificate of registration);
  • provide proof of the alleged infringement of the trademark right (eg, a sample of the infringing copy, together with a genuine copy to show a distinction between them); and
  • undertake personally, or through an authorized representative (who has good knowledge of the trademark), to assist Customs in the identification of infringing goods seized and testify in court as a prosecution witness if necessary.

It is not necessary to pay any bond before Customs acts – unlike in China, where bonds must be required to be posted by the rights owner before administrative raids are carried out by the administrative authorities. In terms of criminal penalties for offences under the Trade Descriptions Ordinance, any person who forges a trademark or falsely applies to any goods any trademark or any mark so nearly resembling a trademark as to be calculated to deceive commits an offence and shall be liable:

  • on conviction on indictment to a fine of HK$500,000 and to imprisonment for five years; and
  • on summary conviction to a fine of HK$100,000 and to imprisonment for two years.

Civil enforcement

Trademark owners and/or licensees mayinitiate civil actions at the Hong Kong High Court for interlocutory/interim injunctive relief or other permanent orders. However, if an action is brought by licensees, the owner must be added as a defendant to the proceedings if it refused to join as a coplaintiff to the action as the outcome of the action concerns the trademark owner. If the plaintiff wishes to apply for an interim injunction to stop the defendant continuing the infringement, pending the commencement of a civil action or trial, it must show that:

  • there is a serious question to be tried; and
  • there is a likelihood of irreparable damage to the plaintiff if the defendant’s infringing activities are not stopped immediately.

The timing of the application for an injunction is important, because any delay may prejudice the application. The plaintiff is also usually required to give a crossundertaking on damages in such cases.

An application for an interim injunction can be made inter partes or ex parte. If it is made ex parte, the plaintiff must make a full and frank disclosure to the court of all material facts to the application. Search orders can also be granted if the application is made ex parte, if the plaintiff can show that:

  • it has a strong prima facie case; and
  • there is a real possibility that the defendant may destroy the evidence of infringement.

Civil proceedings are instituted by filing a writ of summons with a general endorsement of claims or a detailed statement of claim, followed by the filing of pleadings according to certain statutorily prescribed time limits. Discovery follows the pleadings stage. Discovery is a process whereby the parties exchange and inspect documents and witness statements. Once this procedure is completed, matters are then set down for trial.

It is possible to proceed by way of expedited procedures. In uncontested cases, default judgment may be applied for; on the other hand, in cases where the applicant can show that there are real prospects of success on a claim or part of a claim (or the defendant has no arguable case), it may seek Bird & Bird Anti-counterfeiting 2008 – A summary judgment of either the whole or that part of the claim without having to proceed to a full trial.

Decisions handed down by the first instance court may be appealed. However, such appeals to the High Court must be filed by serving a notice of appeal on all the affected parties within 28 days of the date on which the judgment or order is sealed. This is subject to any application for leave to appeal out of time. A dissatisfied party can, with leave, appeal against a decision of the High Court to the Court of Appeal, whose decision shall be final.

The successful party in an action for infringement can opt for a number of possible remedies. These include:

  • an order for delivery up of any infringing goods, material or articles which the defendant has in its possession, custody and control;
  • a permanent injunction enjoining the defendant from further acts of infringement;
  • an order for the disclosure of all information in respect of the infringing activities and the parties that were involved therein;
  • an order that the infringing products be delivered up, forfeited, destroyed or disposed of in such a manner as the court deems fit;
  • an order for damages which have occurred as a result of the defendant’s infringing activities or an account of profits in lieu thereof; and
  • the plaintiff’s costs.

Anti-counterfeiting online

In Hong Kong, as in many jurisdictions worldwide, the sale of counterfeit goods through online channels poses a real threat to brand owners. Typically, online auction sites or trading platforms serve as a channel for individual sellers to sell their counterfeit goods. It is often difficult to track down such sellers as they provide limited identification information and are contactable only by email.

However, there are practical measures that can be taken by trademark owners to counter the online sale of counterfeit products. If counterfeit goods are found to be offered for sale on auction websites, warning letters and demands for removal should be sent to the auction websites themselves, requiring that the offending offers for sale be removed from the websites and ceased forthwith. Further, as most of the goods sold on the online trading platforms are delivered to the purchasers by mail or courier, it is important for trademark owners to record their rights with Customs so that the counterfeit goods may be intercepted.

In serious cases of infringement, trademark owners may consider applying to the courts for Norwich Pharmacal orders against internet service providers to disclose the IP address and the residential address (if the IP address originates from a residence) of the individuals behind the alleged acts of infringement. This then enables the trademark owner to take further action based on the information obtained.

Preventive measures/strategies

In addressing the threat of trademark infringements and trademark-related offences, brand owners may wish to adopt the measures and strategies outlined below.

 Registration of trademarks/domain names

Clearly, there are numerous advantages in securing trademark registration rights, which are the strongest rights to rely upon in an enforcement scenario. As discussed above, one obvious advantage is the ability to record such registration rights with Customs to counter any possible infringement.

To protect trademarks on the Internet, brand owners may wish to consider registering their key trademarks, trade names and company names as domain names, where appropriate.

Monitoring/watch services

It is important to have a system to monitor trademarks that are being filed and/or used by third parties (on the Internet), in case these have an adverse impact on the brand owner’s trademark rights. Brand owners may either subscribe to trademark watch services or conduct their own regular searches. The Intellectual Property Department of Hong Kong provides a free online search service at http://ipsearch.ipd.gov.hk. Trademark owners should also take care to look out for the illegitimate use of their trademarks by third parties and to retain the relevant evidence in support of any legal action that may be initiated as a result thereof.

Use of local IP legal experts and investigators

It is advisable for brand owners to work with local IP legal experts on trademark enforcement matters and in cases of infringement it is often helpful to hire local investigators who are sufficiently knowledgeable to be able to work closely with the legal team to help strategize on the gathering of relevant evidence in support of an enforcement action.

Contractual relationships with third parties

If the trademark in question is used by parties other than the trademark owner through licensing or distributorship arrangements, the relevant arrangements should be devised bearing in mind the potential pitfalls that may result in potential trademark disputes – or worse still, inadvertently encouraging and permitting counterfeiting activity within the brand owner’s authorized distribution network. Hence, the distribution chain needs to be closely monitored, with tightly drafted licence or distributorship agreements and frequent site inspections to ensure that unauthorized parallel goods and overruns are not allowed to surface. Identification of infringing goods Trademark owners need to address the issue of being able to provide clear and acceptable identification evidence before the courts, if they are to succeed in their actions against infringers. For example, in relation to goods that do not require a high level of skill to produce and/or replicate, such as textile products, brand owners can run into difficulties in proving that a particular item is a counterfeit. In such cases, trademark owners may wish to adopt special labels, markings or even covert identification technologies to assist in the identification of genuine goods.

Working closely with Customs

As Customs plays a significant role in facilitating the enforcement of trademarks by way of criminal actions against infringers, it is important for trademark owners to work closely with Customs by providing as much information as possible. As discussed above, registration of the relevant trademark is crucial and such rights should be recorded. When complaints are subsequently filed with Customs, it is important to furnish as much relevant information on the genuine goods as possible, including details pertaining to trade channels, and importers and exporters. Such details will provide Customs with as much useful information as possible in order to enable it to conduct meaningful investigations and to take the appropriate measures to seize the alleged infringing goods when found.

 

This article was first published in World Trade Review's Anti-counterfeiting Guide 2008.