DEACONS WINS MIP LEGAL AWARD IN 2008
At a recent awards ceremony in London, Deacons was awarded the "Hong Kong Firm of the Year" by the international publication, Managing Intellectual Property (MIP). IP Partner, Christopher Britton attended the awards ceremony and accepted the award on behalf of the firm and the Intellectual Property Department in particular. Deacons won the same award in 2007.

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CRIMINAL PENALTIES FOR MISLEADING REPRESENTATIONS REGARDING ENDORSEMENTS BY CELEBRITIES
The Trade Descriptions (Amendment) Bill 2007 (gazetted on 21 December 2007) proposes changes to the Trade Descriptions Ordinance ("TDO") which result in a significant departure from the traditional law of passing off.

The intention of the Bill was to strengthen the existing regime against dishonest retailers. There was concern about various practices including retailers making false or misleading representations regarding their connection with, or endorsement by, individuals such as celebrities, or reputable businesses and organisations.

The Key Provisions

• The definition of "trade description" in the TDO is expanded to include false representations regarding the availability of warranty and after-sale repair and maintenance services.
  
• Retailers must make sure that in relation to any goods exposed for sale by reference to weight unit, the actual price of the goods for the weight unit must be clearly shown.
• Sellers of electronic products such as digital cameras and mobile phones must inform customers before they make payment for the goods, if the price does not include the basic accessories that customers would reasonably expect to be included, e.g. the charger for mobile phones.
• It will be prohibited for any person to make false or misleading representations that any trader is connected with, or endorsed by, an individual or organisation of good standing or reputation.

The first three proposals would appear to be relatively uncontroversial. It is the last provision which has caused the most concern. Misrepresentations as to a connection with celebrities or reputable companies have traditionally been dealt with under the common law action of passing off.

Passing off requires the establishment of three major elements:

• the plaintiff's reputation or goodwill;
• the defendant's misrepresentation, which will confuse the public into believing that the goods or services offered by him are the plaintiff's goods or services, or that their businesses are somehow associated or connected; and
• the damage or likelihood of damage to the plaintiff by the misrepresentation.

Passing off is a civil offence only. The need to establish all three elements means that making out a case can be difficult. The protection by celebrities of their name and image is particularly problematic. The UK and HK courts have been reluctant to recognise a mere right of publicity or unfair competition.

Right of Publicity?
The Bill makes it a criminal offence for any person, in the course of any trade, to make a false representation to any other person that a particular seller is connected with, or endorsed by, any individual or body.
There is no need to establish confusion and damage to the plaintiff which are well-known requirements under passing off. It would appear there is not even a requirement that the individual or body is reputable, so that a criminal offence could be committed even if the individual or body actually has no protectable goodwill under the common law.

The offence refers to "false" as opposed to "misleading" representations. The most obvious example is where a false claim is explicitly made that the seller is an authorised distributor or licensee of X, or a product is endorsed by a celebrity, when they are not. However, what is a "representation"? Does it include the use of a photograph or other indication, such as get-up? If so, this could make the offence significantly wider.

A second offence covers the use of names which are identical or very similar to the name of a reputable individual or body which may lead to misunderstanding. If the maker of the representation ought reasonably to expect that the recipient of the information is likely to be confused because of the similarity in the names, the maker must take steps to prevent the person to whom the representation is made, from misbelieving that the reputable person is connected with the seller of the goods.

Potential Impact
The criminal provisions are intended to protect the public at large, rather than the rights of an individual, so the differences in approach may be understandable. However, the Bill introduces harsh penalties coupled with what would appear to be a much lower threshold of liability.

Whilst this may be good news for IP owners and celebrities, competitors or businesses who may wish to make reference to a person or body in a manner that would not constitute passing off may, nevertheless, find themselves guilty of a criminal offence, which carries a maximum penalty of a $500,000 fine and 5 years imprisonment. If the unauthorised use of a celebrity name or image amounts to a false or misleading representation, query whether the Government has introduced an effective right of publicity without the provisos set out in the common law?

How will these new offences interact with the law of passing off where there is an existing body of case law? The TDO is enforced by Customs & Excise. The proposals require many subjective assessments to be made. How easy it will be for Customs to determine, e.g. what is a representation? When a representation is misleading? What constitutes good standing or reputation?

It should be noted that the TDO applies only to false trade descriptions applied to goods only, not services.

The Bill is currently before the Legislative Council Bills Committee and Deacons is on the Sub-Committee of the Hong Kong Institute of Trade Mark Practitioners invited to make submissions to the Bills Committee. The above concerns were raised and we are waiting to see if there will be any further clarification of these issues.

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"SHADOW COMPANIES" - AN UPDATE
The registration of company names by unrelated entities incorporating third party trade marks has always been an issue for trade mark owners. In Hong Kong, the problem is becoming more acute, particularly with PRC entities setting up companies in Hong Kong. A growing number of companies are being incorporated in bad faith with well-known trade marks as part of their company name. These "shadow companies" usually engage in counterfeiting activities in China. They produce official copies of their Hong Kong certificates of incorporation to Chinese manufacturers and claim that the certificates grant them intellectual property rights in the trade mark, or they use the Hong Kong company to issue trade mark licences or permissions to PRC entities to manufacture products or offer services under the well-known trade marks. The PRC entities will show the written licence or permissions to the authorities if challenged. The fake products manufactured as a result are sold not only in China but throughout the world.

"Too like" - Section 22(2)
Taking action against shadow companies has been difficult as the Companies Ordinance is not equipped to deal with such problems and only ancillary provisions can be used to try to tackle the problem. Under section 22(2), the Companies Registrar has the power to direct a company to change its name within 12 months of registration if, in his opinion, it is "too like" a name already registered. However, the Registrar takes an extremely narrow view of what is considered "too like" and requires that the two names must practically be identical in their entirety. There have been instances where two names, both consisting of a distinctive trade mark/trade name of a well known international company, differentiated only by the words "(Hong Kong)" and "(International)", are not considered by the Registrar to be "too like". It is important to be aware that updated Company Names Guidelines issued in July 2007 now provide that any complaints under section 22(2) should be made to the Registry in good time, preferably not later than one month before the expiry of the statutory period. From our recent experience, this "preference" has been applied strictly, so that the practical deadline for filing a complaint is in fact 11 months and not 12. Companies wishing to file a complaint under this section are advised to set up a monthly watch service against any infringing names and act as quickly as possible.

"Misleading indication" - Section 22A
Section 22A enables the Registry to order a company to change its name if the Registry believes that "the name by which a company is registered gives so misleading an indication of the nature of its activities as to be likely to cause harm to the public," e.g., a name incorporating the word "Bank" when it is in fact not a bank. Unlike Section 22(2), there is no deadline in which to apply to the Registry. However, so far, the Registrar has not been willing to apply this to the situation where a company incorporates a third party's name or trade mark in its name, thereby giving a misleading impression that they are related.

Defunct companies - Section 291
Under Section 291, the Registrar has the power to strike a company off the register if it is of the view that the company is not carrying on business. However, a company can avoid striking off by filing a simple return.

Moreover, the Registrar puts the burden on the complainant to prove that the company is not carrying on business anywhere in the world and the Registrar considers a company to be in operation in Hong Kong even if its only business activities are in the PRC. A substantial amount of evidence must be gathered and submitted by a complainant in order to succeed under this provision.

Court orders
Even if a court order is obtained, restraining the conduct of infringing activities in Hong Kong and directing the infringer to change its name, this can be very difficult to enforce. As the Registrar is not a defendant to the legal proceedings, the court order is not binding on him. Many infringing companies are shell companies with no real operation in Hong Kong and they simply ignore the court orders. The Registrar is powerless to take any action to strike off the company name or direct a name change if it refuses to comply with the court order.

One possible way that has recently emerged, is to obtain an order from the court appointing a third party, such as a law firm, to change the name of the defendant if it refuses to comply with the court order after a certain period of time. There have, however, been cases where the infringing company then promptly changed the name to one that still consists of the infringing name. Moreover, the cost of such an action is not insignificant, particularly when many infringing companies are involved.

Interim measures
The Government has now set up a working committee with a number of experienced trade mark practitioners, including our firm, to discuss ways to tackle the problem. As a result of discussions at the working committee meetings, the Registry has taken some steps to deal with the issue within the statutory constraints of the existing Companies Ordinance. A number of interim administrative measures have been proposed:

• publishing on the Companies Registry website a list of companies which have failed to comply with the Registrar's direction to change their name. The list will be updated on a monthly basis.
• A Companies Registry Circular issued on 24 December 2007, provides that from 1 January 2008, all Certificates of Incorporation and Certificates of Change of Name will contain a warning statement in English and Chinese that "Registration of a company name with the Companies Registry does not confer any trade mark rights or any other intellectual property rights in respect of the company name or any part thereof." The purpose of the health warning is to remind companies as well as third parties dealing with them that the registration of a company name does not confer any intellectual property rights, nor is it a defence to any subsequent claims for infringement of any trade mark or other intellectual property rights.
• The Registry has also indicated that, in the longer term, it may be prepared to consider provisions which would allow the Registry to reject the registration of a company name that included a defensive trade mark. However, this is only a suggestion and would require policy approval.
• One of the more important and useful proposals made at the working committee meetings was to amend the Companies Ordinance to give the Registrar the power to change a company's name if there is a court order compelling it to change its name and it refuses to do so. The Companies Registry has in principle agreed to the suggestion.

The Government has just released a Consultation Paper on the Rewrite of the Companies Ordinance which includes specific proposals to tackle the possible abuses of the company name registration regime by empowering the Registrar to act on a court order directing a defendant company to change its name and for the Registrar to substitute the infringing name with its registration number if the company fails to comply. However, despite continued lobbying from frustrated trade mark owners and professional associations, the Government has been reluctant to consider piecemeal amendments to the Companies Ordinance and, whilst the Consultation Paper is an indication of progress, the Government still intends such a provision to be implemented as part of the complete overhaul of the Companies Ordinance which is "tentatively" scheduled for 2010.

Going forward…
In the meantime, although there are hurdles to be overcome, trade mark owners should not be discouraged. There are options which have proven to be successful, including applying to the court for an order to restrain infringing activities and to authorise the plaintiffs' solicitors to pass a special resolution on behalf of the shareholders to change the name of the shadow company.

Trade mark owners and their advisors need to be proactive in combating the problem. Since the Companies Registry does not take the initiative to search for similar names, trade mark owners have to monitor the Companies and Trade Marks Register to see if their trade marks have been appropriated. In some cases, cross-border action may be necessary and monitoring Chinese Companies Registers and crosssearching of the Chinese Trade Marks Register may be required. The practice of the Companies Registry is constantly changing and corporations dealing with shadow companies need to take a creative and flexible approach to the problem.

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CIVIL JUSTICE (MISCELLANEOUS AMENDMENTS) ORDINANCE GAZETTED
After seven years of review and consultation, the Civil Justice (Miscellaneous Amendments) Ordinance was gazetted on 6 February 2008. The Ordinance marks the first substantial reform of Hong Kong's civil procedure for almost two decades.

Consultation on the subsidiary legislation is still ongoing and the reforms are expected to come into force on 2 April 2009 rather than 1 April, as the Judiciary decided that April Fools Day would be inappropriate.

Hong Kong did not want to introduce a completely new civil procedure, as implemented in the United Kingdom under the Woolf Reforms, but preferred to "cherry pick" and make alterations to the existing ordinance and court rules.

Underlying Objectives
Judges have been given far-reaching powers of case management in line with the 'underlying objectives' to be
applied by the courts, which are:

• to increasing cost-effectiveness of proceedings;
  
• to ensure cases are dealt with expeditiously;
  
• to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings;
  
• to promote greater equality between the parties;
  
• to facilitate settlement of disputes;
  
• to ensure the resources of the court are fairly distributed.

Key Changes

Costs-only proceedings
Currently, if the parties reach settlement prior to commencement of proceedings, there is no procedural mechanism that allows them to resolve the quantum of costs without initiating full litigation of the entire dispute. The new rules will allow parties who have reached a settlement to commence proceedings to resolve the issue of costs only.

Interim relief in aid of foreign proceedings
The court will have power to appoint a receiver or to grant interim relief (including an interlocutory injunction) in aid of foreign proceedings in cases where the plaintiff would otherwise have no cause of action in Hong Kong but would be prejudiced in the event that any judgment which he may obtain in a foreign jurisdiction may ultimately have to be enforced in Hong Kong.

Pre-action Discovery
The court's powers to order pre-action discovery will be extended. (Currently this is only available in relation to personal injury or death). The court will order pre-action discover if it is necessary to dispose fairly of anticipated proceedings and save costs. Documents must be "directly relevant" to the issues in dispute. This is a narrower than the Peruvian Guano standard for general discovery. General discovery remains unchanged.

Cost Orders
Wasted cost orders will be made, the aim of which is to discourage unmeritorious applications. The jurisdiction is extended to cover barristers as well.

A further change is the repeal of the current rule which prohibits a party to an action from seeking costs against a non-party who is involved behind the proceedings but who is the real litigant in the action. The new rules will permit the court to make orders against a non-party where it is satisfied that it is in the interests of justice to do so.

Pleadings
A defence is expected to be more specific; bare denials will not be allowed. A defendant denying an allegation must state his reasons and, where appropriate, state his own version of the facts.

Statement of Truth
Pleadings, witness statements and expert reports must be verified by a statement of truth. Unlike an affidavit or affirmation, the statement does not have to be sworn or affirmed. Nevertheless, a person who makes a false statement without an honest belief in the truth of the facts pleaded may be cited for contempt of court.

Sanctioned Offers
In Hong Kong, defendants are permitted to protect their position in costs by making a payment into court or by way of a "Calderbank" offer. The reforms extend this to a plaintiff by creating a regime of sanctioned offers and payments.

Interlocutory Applications
The new rules will allow Masters to deal with interlocutory applications on paper. In addition, the principle that costs follow the event (loser pays) will no longer be the guiding principle in interlocutory applications. The courts will have more freedom to make costs orders according to the underlying objectives, including the power to make summary assessments of costs at the conclusion of interlocutory hearings payable in 14 days. Assessment is currently at end of an action.

Appeals
The new rules in relation to appeals from Masters to the Judge provide that no further evidence (other than evidence as to matters which have occurred since the order or judgement under appeal) may be received on appeal except on "special grounds".

With respect to appeals to the court of Appeal, the new rules provides for the application by summons and also the court's power to decide the application on paper.

Case Management Summons
Summons for direction will cease to exist. Parties will be obliged to file a prescribed questionnaire within 28 days of close of pleadings and take out a "case management summons". The court will fix a timetable with milestone dates etc to deal with case management matters.

The amendments to the civil justice system will significantly change the way that litigation is practised in Hong Kong. Advance preparations must be made at an earlier stage to address all matters that will be raised at case management conferences including drawing up the list of issues, case planning, advance consideration and advice on evidence. Hong Kong has the advantage of referring to the UK experience, although it remains to be seen to what extent the UK decisions can be relied upon.

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HONG KONG IMPLEMENTS DOHA
The Patents (Amendments) Ordinance 2007 was gazetted on 30 November 2007 and came into force on 22 February 2008. The Ordinance amends the compulsory licensing provisions of the Patents Ordinance to implement a 2005 Protocol for amending the TRIPs Agreement following the "Doha Declaration on the TRIPS Agreement and Public Health" of 2001. The intention is to make it easier to obtain access to generic versions of patented drugs when public health issues are at stake. The existing mechanisms for compulsory licensing and government use will remain.

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THE EFFECT OF THE BT DECISION ON DISCLAIMERS
The Hong Kong Trade Mark Ordinance which came into effect on 4 April 2003 abolished the requirement for mandatory disclaimers of indistinctive elements in trade mark registrations. A trade mark is now prima facie registrable so long as the mark as a whole is sufficiently distinctive. However, trade mark registrations with disclaimers granted under the old law are deemed to have been transferred to the new Register. This change in practice, as illustrated by the decision last year of the Registry in relation to the "BT" mark, would appear to provide wider protection for owners of marks containing indistinctive elements.

In the BT case, British Telecommunications Plc had existing trade mark registrations for the mark " " in Classes 9 and 38 which were granted under the old law. These were subject to a disclaimer of the letters "BT" since non-pronounceable two-letter marks were previously considered indistinctive.

Btcino Spa subsequently applied to register a logo mark including the letters "BT" under the new law. British Telecom's registrations were not cited against Btcino's applications because of the disclaimer. However, the junior mark was allowed to proceed to registration without any disclaimers and, when British Telecoms subsequently applied to re-register its trade mark, its application was blocked by Btcino's application. British Telecoms applied to the Trade Marks Registry for rectification to remove the disclaimer condition but this was refused.

Trade mark owners should consider taking advantage of the change in practice by reviewing their portfolios and re-filing for marks which were subject to disclaimers under the old law. However, it is important to conduct a search of the Register to ensure that there are no intervening registrations which could cause the same problems as experienced by British Telecoms. Deacons can assist in any portfolio review and would be pleased to conduct a complementary clearance search prior to re-filing.

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HONG KONG INTRODUCES RENTAL RIGHTS AND ANTI-CIRCUMVENTION MEASURES
Rental rights Under the Copyright (Amendment) Ordinance 2007 ("The Amendment Ordinance"), the rental right which originally applied only to computer programs and sound recordings has now been extended to films and comic books. Anyone who intends to conduct commercial rental activities in relation to films and comic books has to obtain prior authorisation from the copyright owners. Copyright owners will be able to obtain civil remedies for violation of their rental rights. The relevant provisions are due to come into force on 25 April 2008. The law is not retroactive and will not affect existing stocks of video discs and comic books acquired before the commencement date. These can continue to be rented out. The Government has been encouraging copyright owners and the operators of rentals shops to work out a mutually acceptable rental licensing scheme and a number of meetings have been held. The HK Video Development Foundation and the Alliance of the Rental Industry have now reached a consensus. The scheme includes:

• Setting an initial ceiling for the rental licence fee at 130% of the retail version;
  
• Maintaining the ceiling for one year, allowing the relevant parties to adapt to the changes and to provide more time for the market to adjust;
  
• Cancelling the deposit requirement; and
  
• Issuing rental versions whenever distributors can secure rental rights from copyright owners.

The parties have agreed to implement the licensing scheme progressively to allow the market time to adjust. The parties have also agreed that the market should decide the future fee levels. At the time of writing, the Hong Kong Comics Federation is still finalising the details of the rental licensing scheme for comics and this should be announced soon.

Anti-Circumvention
The Amendment Ordinance also introduced new offences in relation to the circumvention of technological measures which are put in place as a barrier to prevent infringement of copyright. From 25 April 2008:

• It will be a civil offence to knowingly circumvent a technological measure, e.g. disabling a password function to gain access to a subscription-only website;
• It is already a civil offence to deal in tools which circumvent copy-protection measures on a commercial basis, or to publish information intended to enable or assist persons to circumvent copy protection. There will now be extended civil liability against any person who deals in tools which circumvent access control measures as well or provides circumvention services (irrespective of whether the service is provided in a commercial context);
• It will be a criminal offence to engage in the commercial dealing of circumvention tools or provide circumvention services on a commercial basis, e.g. the sale of modified game consoles which allow the playing of pirated games;
• There will be new rights to copyright owners and their exclusive licensees to seek civil remedies against any person who tampers with rights management information (RMI) attached to copyright works. Currently, only the person who provides the RMI is entitled to remedies. RMI is information that identifies content protected by copyright, the rights owners of such content and the terms and conditions of use associated with it. Digital works can easily be changed or manipulated. RMI is important as it can certify the integrity and authenticity of works.

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Whilst every effort has been made to ensure the accuracy of this publication, it is for general guidance only and should not be treated as a substitute for specific advice.