Intellectual property — trade marks — passing off — goodwill generated by branch office in Hong Kong of foreign law firm — ownership of goodwill — approach — unlawful transfer of trade marks — infringement of trade marks — whether summary judgment appropriate
Dacheng Beijing (P2), a large PRC law firm which also provided legal services overseas, was the registered proprietor of trademarks in the PRC bearing or incorporating the words “DACHENG” and/or “大成”. D1 was a partner in P2’s Hong Kong branch, Dacheng Law Offices (Dacheng HK). D1 was also the sole shareholder and director of D2, a Hong Kong company which changed its name to Dacheng Legal Services (Dacheng LS) and registered trade marks in Hong Kong bearing or incorporating the words “DACHENG” and/or “大成” (the HK Trade Marks). The HK Trade Marks were later transferred to P1, a Hong Kong company authorised by P2 to serve as Dacheng HK’s management company. Subsequently, Dacheng HK was converted into a local law firm, with D1 as the principal and sole practitioner, and was permitted by P2 to use the name or mark “DACHENG” or “大成” in carrying out its business. D1 procured the transfer of the HK Trade Marks from P1 back to Dacheng LS, but Ps claimed that such transfer was unlawful. Around the same time, the relationship between P2 and Dacheng HK came to an end due to differences between them and D1 had since refused to change Dacheng HK’s name or stop using the name of “DACHENG” or “大成” despite P2’s demands. Ps brought proceedings against Ds, seeking summary judgment for: (a) passing off; (b) unlawful transfer of the HK Trade Marks to Dacheng LS; and (c) infringement of its trade marks under s.18(1) of the Trade Marks Ordinance (Cap.559). Ds argued, inter alia, that the goodwill in the name or mark DACHENG” or “大成”in Hong Kong belonged to Dacheng HK and not P2.
Held, allowing the application in part by granting summary judgment in the passing off claim, that:
1) Where, as here, a local entity was permitted to use a name or mark belonging to a foreign entity and goodwill was generated from such use locally, the question of who owned that goodwill was a question of fact to be decided on the evidence adduced. The agreement between the parties was relevant, and if there were contractual terms governing the ownership of goodwill, the court would give effect to them. Otherwise, the matter would have to be resolved by way of a factual inquiry (Guangzhou Green-Enhan Bio-Engineering Co Ltd v Green Power Health Products International Co Ltd (HCA 4651/2002,  HKEC 513) applied). (See para.35.)
2) Here, on the facts, there was passing off. D1 used, and was permitted by P2 to use, the name or mark “DACHENG” or “大成” in carrying out the sole proprietorship business of Dacheng HK only because that firm was regarded as a branch office of P2. There was a clear understanding between P2 and D1 that any goodwill which might exist in the business relating to the supply of legal services in Hong Kong distinguished by the name or mark of “DACHENG” or “大成” belonged to P2. It could not have been the parties’ intention or agreement that D1 would be entitled to use such name or mark in his own business for his own benefit. Further, to permit D1 to do so would give rise to a real likelihood or risk that the public in Hong Kong would be led to erroneously believe that the services rendered by D1 were those of P2; and P2 would likely suffer damage as a result (Reckitt & Colman Products Ltd v Borden Inc  RPC 341, Re Ping On Securities Ltd (2009) 12 HKCFAR 808, Starbucks (HK) Ltd v British Sky Broadcasting Group Plc  1 WLR 2628 applied). (See paras.36–40, 43.)
3) As for the dispute concerning the transfer back of the HK Trade Marks to Dacheng LS, if the facts occurred as alleged by D1, Ds had an arguable defence to Ps’ complaint of unlawful transfer which ought to go to trial. (See para.41(1).)
4) As regards s.18(1) of the Ordinance, P2 was never the registered owner of the HK Trade Marks and so it had no cause of action for trade mark infringement under s.22(1). On the other hand, whether P1 had any such cause of action depended on, inter alia, the validity of the transfer back of the HK Trade Marks to Dacheng LS. (See para.41(2), 43.)
This was an application by the first and second plaintiffs for summary judgment against the first and second defendants in an action for passing off, unlawful transfer of trade marks and infringement of trade marks. The facts are set out in the judgment.