Hong Kong Law ReportsIssue 9

June 2015

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Intellectual Property – Trade Mark Infringement Pg 8 & 10

Unlawful Sex and Disability Discrimination Pg 6

Employment – Termination and Bonuses Pg 4

Injunctions – Public Passageways Pg 1Th

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Pinsent Masons Hong Kong Law Reports is produced by specialist international law firm Pinsent Masons.

The purpose of the reports is to collect leading cases relating to civil procedure, employment, technology and IP matters in Hong Kong, together with occasional overseas decisions from common law jurisdictions, in a readily accessible form useful for practitioners and in-house counsel alike and to provide authoritative commentary on each. The reports are available in electronic form on www.out-law.com and www.pinsentmasons.com.

Editorial Board: Peter Bullock (Editor), Paul Haswell (Editor), Jolene Reimerson (Managing Editor).

Hong Kong Cases

3 cases against the Occupy Central Campaign protestors: brought by Chiu Luen Public Light Bus Co Ltd; Lai Hoi Ping and Tam Chun Hung;

and Goldon Investment Limited

Tadjudin Sunny v

Bank of America, National Association

Li Pui Hav

Wong So Kee Transportation Limited

Tsit Wing (Hong Kong) Co Ltd & Anorv

TWG Tea Co Pte Ltd & Anor

UK Cases

(1) Cartier International AG(2) Mont Blanc – Simplo GMBH(3) Richemont International SA

vBritish Sky Broadcasting Limited and Others

vOpen Rights Group

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Pinsent Masons | Hong Kong Law Reports

[Court of First Instance – HCA 2086/2014, HCA 2104/2014 and HCA 2094/2014]

This report covers three related cases:

Chiu Luen Public Light Bus Co Ltd Plaintiff

– and –

Persons unlawfully occupying or remaining on the public highway namely, the westbound carriageway of Argyle Street between the junction of Tung Choi Street and Portland Street and/or other persons hindering or preventing the passing or

repassing of Argyle StreetDefendants

Lai Hoi Ping and Tam Chun Hung Plaintiffs

– and –

Persons occupying portions of Nathan Road near to and between Argyle Street and Dundas Street to prevent or

obstruct normal vehicular traffic from passing and repassing the occupied areas

Defendants

Goldon Investment Limited Plaintiff

– and –

Persons who erected or placed or maintained obstructions or otherwise do any act to cause obstruction, or to prevent or hinder the clearance and removal of the obstructions at the

entrances or exits of CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong (“CITIC Tower”) and/or the vehicular/pedestrian passageway at Tim Mei Avenue and/or Lung Wui Road which

block vehicular or pedestrian access to CITIC TowerDefendants

Two judgments of the Court of First Instance (High Court Judge Jeremy Poon) dated 20 October 2014 and one judgment of the Court of First Instance (High Court Judge Thomas Au) dated 10 November 2014

Civil Procedure – Ex parte injunctions – Protestors – Obstruction to public passageways – Whether serious question to be tried – Whether damages adequate remedy – Balance of convenience

The Facts

On 28 September 2014 the Occupy Central Campaign (“OCC”) commenced with the stated objective of achieving universal suffrage in Hong Kong. Protestors occupied key parts of Hong Kong including Mongkok and Admiralty (the “Occupied Areas”).

Three separate cases were issued against the protestors, brought by Chiu Luen Public Light Bus Company Limited (under the “Minibus Manager Action”), Mr. Lai Hoi Ping and Mr. Tam Chun Hung (under the “Taxi Operators Action”), and Goldon Investment Limited (under the “CITIC Tower Action”), (together the “Plaintiffs”). The Plaintiffs claimed that their business operations were adversely affected by the blockage and barricades erected by the OCC protesters.

On 20 October 2014 the Plaintiffs obtained ex-parte injunctions against the protesters. The CITIC Tower Action restrained protestors from blocking entrances and exits of CITIC Tower; the Taxi Operators Action (both suing on their behalf and representing their respective taxi drivers associations) and Minibus Manager Action restrained protesters from occupying major roads in Mongkok. On 10 November 2014, the Plaintiffs sought to continue the injunctions and asked the Court for directions to facilitate the enforcement of the injunctions.

Various protesters made applications to the Court to be named as Defendants in order to oppose the Plaintiffs’ extension of injunction applications. The issue of whether the Plaintiffs had satisfied the requirements for an interlocutory injunction was revisited.

The Judgments

On 20 October 2014 and 10 November 2014, the Court dealt with the applications for interim injunction and applications for continuance of the injunctions, respectively, for all three cases on the same day.

In outlining the applicable principles on the grant of an interlocutory injunction, the Court relied on Turbo Top Ltd v Lee Cheuk Yan [2013] 3 HKLRD 41:

(a) whether there are serious issues to be tried;

(b) whether damages would be an adequate remedy for either side; and

(c) if damages would not be adequate for both parties, where the balance of convenience lies in terms of whether or not to grant an interim injunction pending the trial of the matter.

CITIC Tower Action

The Plaintiff was the owner of CITIC Tower and claimed that there was a case of public and private nuisance against the Defendants. The Plaintiff claimed that it suffered losses in rent received from car park spaces and shops. It also claimed that repair and maintenance vehicles were unable to access CITIC Tower which posed a health and safety risk to the occupants of CITIC Tower. The Court found that there was a serious issue to be tried given the Plaintiff’s private right to the occupied areas. Damages were also found to be inadequate as:

(a) there was nothing to show that the unnamed Defendants were in a position to compensate the Plaintiff’s financial loss; and

(b) in any event, damages would not be an adequate remedy for the continuing health and safety hazard posed by the blockages.

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The Court further considered that the Defendants would not suffer any damages even if the interim injunction was wrongly granted. The Court held that the balance of convenience tilted in favor of the Plaintiff and extended the interim injunction.

Taxi Operators Action and Minibus Manager Action

The Plaintiffs’ respective claims of public nuisance against the Defendants were based on a state of affairs obstructing the public in exercising or enjoying rights common to members of the public.

In opposition, the Defendants referred to Benjamin v Storr (1874) LR 9 CP 400 and challenged the Plaintiffs’ rights to commence a claim of public nuisance. They claimed that as public nuisance infringes the general public’s right, the Secretary for Justice should be the party to bring a claim for and on behalf of the general public suffering inconvenience.

A private individual is entitled to a claim in public nuisance only if he can demonstrate that he has suffered a “particular, direct and substantial” injury above and beyond what is suffered by the rest of the public at large. It was argued that the Plaintiffs did not prove a “particular, direct and substantial” injury above and beyond what was suffered by the rest of the public at large to entitle them to bring a claim in public nuisance without joining the Secretary for Justice.

The Court held that the Plaintiffs had shown a triable case that their loss and damage was “particular, substantial and direct”. The Court held that the “particular” damage was pecuniary and that it was appreciably greater than any suffered by the general public. Furthermore, “direct damage” included those that flowed from the nuisance through a chain of events rather than merely those which arise immediately. This included loss from the general traffic blockages in Kowloon caused by the OCC, regular road users diverting their route due to the OCC and taking other forms of transport instead of the Plaintiffs’ commercial vehicles.

The Court held that damages were not a sufficient remedy and tilted the balance in favour of granting and continuing the injunctions to the Plaintiffs. The Court ordered that the interim injunction be extended.

In the original ex parte injunction hearing dated 20 October 2014, the Court also considered the defence of civil disobedience. The Court considered the classic case of R v Jones [2007] 1 AC 136 where Lord Hoffmann adopted a fairly liberal approach towards civil disobedience constituting a justification for property damage. The Court, however, took into consideration the duration, scale and impact of the OCC and observed a real risk of the OCC turning into civil disorder. The Court rejected civil disobedience as a defence “no matter how noble the underlying cause the participants may consider it to be”.

Enforcement Directions

In the judgment dated 10 November 2014, seeing the difficulties in executing the ex parte injunctions (as the Defendants had refused to comply with the relevant Orders), the Judge directed that:

1. the bailiff do take all reasonable and necessary steps to assist the Plaintiff and their agents to effect the clearance and removal of the relevant obstructions;

2. the bailiff be authorised and directed to request the assistance of the police where necessary;

3. any police officer be authorised to arrest and remove any person who the police officer reasonably believes or suspects to be obstructing or interfering any bailiff in carrying out his or her duties in enforcing the terms of the injunction order, provided that the person to be arrested has been informed of the gist of the terms of the Court Order and that his action is likely to constitute a breach of the Order and that he may be arrested if he does not desist;

4. any person so arrested by the police shall be brought before the Court as soon as practicable for further directions.

The Court was of the view that any person who obstructs the performance of the bailiff’s duty would be in criminal contempt of Court. It was the Court’s view that the police authorisation direction (i.e. the third direction aforementioned) would help to inform the Defendants of the consequence of any disobedience and confirm the police’s power which would not only make the Orders clearer and fairer but also facilitate the due administration of justice.

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Commentary by: Rachel Cheng Pinsent Masons E: rachel.ky.cheng@pinsentmasons.com

The OCC was an unprecedented civil disobedience action in Hong Kong. Protesters occupied the streets of Hong Kong for nearly 70 days. Despite the criminal nature of the protesters’ occupy movements at the Occupied Areas, the Hong Kong police did not initially step in to arrest the protesters for unlawful assembly or public disorder. The Secretary for Justice also did not commence claims against the protesters for public nuisance. Facing the disruption and losses to their business operation, the Plaintiffs in these three actions felt they had no choice but to take matters to the civil court for civil remedies.

In general, because of the draconian nature of an injunction order, the Court does not grant injunctions lightly. The losses, damages, inconvenience and the threats to society brought about by the occupy movement and the gravity of the situation cried out for the balance to be tilted in favour of granting the injunction orders.

Although the Court granted the injunctions sought, the injunctions did not work well at the outset; the protesters disregarded the Court orders; the police did not step in. The Plaintiffs decided to seek orders from the Court for particular enforcement directions, which is a rare thing to do, and a lot of preparation and meetings with the bailiffs took place before the actual enforcement of the injunction orders.

The implementation and execution of the injunction orders was particularly challenging. The inherently limited scope of the injunction meant that the protesters could easily move to other public locations and continue protesting. The scale of the OCC protest and the emotions of the protesters also made it extremely difficult for the Plaintiffs to enforce the injunctions.

The Plaintiffs had to instruct bailiffs to assist with the execution of the injunction orders; trucks and movers were hired to clear the blockades placed by the protesters in the Occupied Areas. It was clear that the costs for obtaining the injunction orders were high but the chances of recovering the costs incurred and any other damages from the Defendants were low. The Defendants were unlikely to have the means to satisfy any judgment against them. The purpose of an injunction application is to grant immediate relief to the Plaintiffs. However, given the extreme circumstances and the practical difficulties in enforcement, the Plaintiffs did not get the immediate relief that they were technically granted under law.

Whilst any person who fails to comply with a Court order should be found in contempt of Court, the Plaintiffs would need to commence separate contempt proceedings against those in breach of the Court order. This was not something that the Court, the police nor the Secretary for Justice would initiate on its own, although a lot of protesters were subsequently arrested by the police during the clearance of the blockages for breach of the injunction orders.

The issue of bad press in relation to the injunction proceedings should also not be overlooked. Due to the political nature of the OCC and the inaction by the police and the Government, the Plaintiffs were subject to scrutiny by both the public and media.

Litigants should therefore consider carefully the possible consequences and costs involved in bringing such an injunction application. Although a private claim of injunction is possible in such extreme circumstances – and it seems that the Court is ready to grant relevant injunctive relief – the costs, difficulties in execution and the bad publicity should be carefully taken into consideration. It is also sensible to consider how an injunction would be enforced at the outset. If potential difficulties on execution can be foreseen, litigants should seek directions from the Court at the initial application to ensure that the injunction can be enforced without difficulty.

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[Court of First Instance – HCA 322/2008]

Tadjudin Sunny Plaintiff

– and –

Bank of America, National AssociationDefendant

Judgment of the Court of First Instance (The Honourable Mr Justice To) dated 24 December 2014

Employment – Termination – Mala fide reason for dismissal – Avoidance of bonus payment

The Facts

The plaintiff (“Tadjudin”) was employed by the defendant (the “Bank”) as an analyst with an annual salary of around US$185,000 in 2000. The Bank awarded her generous bonus payments from 2000 to 2006, often between 2 and 3.5 times her annual salary, which were based on her performance under the Bank’s bonus programme. From 2005-2006, Tadjudin received poor performance ratings and received lower bonuses. In August 2007, the Bank terminated Tadjudin’s employment by giving her one month’s salary in lieu of notice in accordance with the terms of her employment contract. She did not receive any bonus payment for 2007.

Tadjudin brought a claim against the Bank for: (i) wrongful termination with the intention to deprive her of the performance bonus for 2007; and (ii) irrational, perverse and mala fide evaluations of her performance bonuses from 2005 to 2007.

The Judgment

The Court considered a number of issues raised by the claim:1. Nature of the discretionary bonus under the Performance

Incentive Programme (“PIP”)

Tadjudin’s employment contract provided the following: “You will be eligible for consideration under the Bank’s performance incentive programme and it will subject to you being employed by the Bank at the time of payment.”

The Court noted that although the decision of whether to award a bonus was subject to the Bank’s discretion, it was not wholly discretionary. The PIP was administered through a specific evaluation process and there was an undisputed correlation between the size of a bonus and the profit contributed by an individual. The Court held that the Bank’s discretion in exercising the PIP was not to be done in an irrational, perverse or arbitrary manner that was mala fide.

2. Implied term of anti-avoidance

The Court considered a number of issues when looking at whether a “term of anti-avoidance” could be implied into Tadjudin’s employment contract (i.e. that the Bank should not exercise its

rights of termination by making a payment in lieu of notice in order to avoid her being eligible for a bonus payment).

First, the Court held that such an implied term was consistent with the express terms of the contract, despite clause 3 of Tadjudin’s contract which entitled either party to terminate by giving one month’s notice in writing or one month’s salary in lieu of notice. The Bank argued that clause 3 gave it a lawful right to terminate at any time by notice or payment in lieu without identifying a reason for termination. The Court rejected this proposition and held that an employer has an implied duty of mutual trust and confidence imposed by law to act in good faith.

Secondly, the Court rejected the Bank’s claim that the term of anti-avoidance was inconsistent with ss. 6 and 7 of the Employment Ordinance (Cap. 57) (“Ordinance”), which relate to termination by notice or payment in lieu. The Court held that these sections were not mandatory but permissive, and that these statutory termination rights could be waived via express or implied terms (including an implied term of anti-avoidance).

Thirdly, the Court considered that an employee would have an incentive to perform under an assurance that the performance bonus would be given in a bona fide manner. An implied term was therefore consistent with clause 3 because it supplemented the express terms and gave business efficacy to the employment contract.

Fourthly, the Court rejected the Bank’s defence that Tadjudin’s remedies were limited to Part VIA of the Ordinance, which provides statutory protection for employees who are dismissed without a valid reason. The Bank relied on the Employment Rights Act 1996 which provides comprehensive statutory protection for employees who are unfairly dismissed in the UK, but the Court considered that the English and Hong Kong regimes were not comparable in this regard.

The Court therefore held that a term of anti-avoidance could be implied into an employment contract, following BP Refinery (Westernport) Pty Ltd v President, Councillor and Ratepayers of the Shire of Holdings (1977) 180 CLR 266.

3. Assessments of 2005 and 2006 bonuses – irrational, perverse, arbitrary or mala fide?

The Court followed Mummery J’s decision in Keen v The Commerzbank AG [2007] ICR 623 on the principles in challenging an employer’s qualified discretion to award a bonus. To succeed, an employee would have to show that no reasonable employer in the same field would have exercised his discretion in that way, or that the employer had acted irrationally.

Bonus awards under the Bank’s PIP were based in part on the employee’s performance evaluation. In 2005, Tadjudin’s performance rating was downgraded from “Exceeds” to “Meets” because her target was US$10 million but her contribution was only US$8 million. The Court held that her 2005 downgrading accorded with her target and profit contribution, and her 2005 bonus award reflected her poor performance, so it could not be considered irrational.

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As for the 2006 bonus, Tadjudin claimed that the bonus was irrationally low, based on a comparison with the bonus received by her boss. However, the Court held that the issue was not whether a bonus awarded to another employee was irrationally high, so the comparison with her boss was irrelevant. The Court found that the Bank’s performance evaluation of Tadjudin in 2006 noted issues with her teamwork, cooperation and sharing with team members, which affected her performance rating and her bonus. On this basis, the Court held that the Bank’s assessment for Tadjudin’s 2006 bonus was not irrational.

4. Termination to avoid 2007 bonus payment

Tadjudin had a high burden of proof of demonstrating that she was dismissed because of her employer’s intention of avoiding her eligibility for a bonus under the PIP. Intention is subjective, so the test for the Bank’s intention is not reasonableness but genuineness, requiring proof of a genuine reason for termination of Tadjudin’s employment or the Bank’s genuine belief that it had a valid reason to do so.

The Court found that despite substantial improvements made in Tadjudin’s performance in 2007, her employment was terminated by the Bank on the pretext of her failing the PIP process. The Court found the Bank’s allegations of Tadjudin’s bad performance in 2007 to be unsubstantiated. It was not necessary for Tadjudin to prove that the bad faith intention was the sole intention – it would be sufficient if it was one of the dominant intentions of her dismissal. On the totality of evidence, the Court held that the Bank terminated her employment with an intention to deprive her eligibility for the PIP and the 2007 bonus (which should have been substantial based on her performance in 2007).

5. Quantum of damages

The Court looked at the PIP criteria and considered the bonus that Tadjudin should have been awarded for her performance had she not been dismissed before the payment date. The Court held that the Bank, on a proper exercise of its discretion, would have awarded her a bonus of US$500,000 and thus assessed damages in favour of Tadjudin in the amount of HK$3,900,000.

Commentary by: Paul Haswell Pinsent Masons E: paul.haswell@pinsentmasons.com

One of the key considerations when dismissing any employee is the final payments due to that employee when his or her employment comes to an end. This typically encompasses any payment in lieu of any applicable notice periods, accrued but not taken holidays, and any additional payments guaranteed by contract which have accrued but have not been paid. Bonus payments are one such type of payment that will be included in an employment contract, and this case shows clearly that the Courts will not take kindly to any employer who seeks to terminate an employer in order to avoid making payment of a bonus (or indeed any other payment) to an employee.

This is true even if a payment is classed as “discretionary”. Bonus payments are commonly described as “discretionary” in order to avoid them being classified as salary under the Employment Ordinance (and therefore payable in the event of termination or taken into consideration for any severance or long service payment), but it is evident that there are limits to what can properly be considered to be within an employer’s discretion.

The Court stated that an employer has an implied duty of mutual trust and confidence imposed by law to act in good faith.

It stated also that a “term of anti-avoidance” could be implied into Tadjudin’s employment contract. This begs the question: should an implied term of anti-avoidance be implied into every employment contract? Given that any attempt to expressly exclude the term could be seen as a breach of the implied duty of mutual trust and confidence, and a show of bad faith, then the answer must be yes. When terminating an employee one must ask if the termination could be seen as an attempt to avoid making a payment to the employee which would otherwise be due. Employers must also be wary of using performance-related concerns to manage out an employee (regardless of whether those concerns are genuine) when the timing of the employee’s departure could be seen as a method of dodging the payment of a (possibly substantial) bonus. If you are considering terminating an employee’s employment shortly before a bonus would be awarded then think carefully before taking any action, or if in doubt consider making a part payment of the bonus in question and/or ensuring that a compromise agreement is in place.

Lastly, and as an aside, it would seem that the Court erred in stating that sections 6 and 7 of the Employment Ordinance are permissive rather than mandatory. Section 70 of the Employment Ordinance clearly expresses that any contract term “which purports to extinguish or reduce any right, benefit or protection conferred” upon an employee by the Ordinance is void, so it is not correct to state that the right of termination can be expressly or impliedly waived where such waiver would reduce the right of an employee.

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[Hong Kong District Court DCEO 4/2013]

Li Pui HaPlaintiff

– and –

Wong So Kee Transportation LimitedDefendant

Judgment of the District Court (Judge Ko) dated 25 June 2014

Employment – Sex Discrimination – Disability Discrimination – Assessment of damages

The Facts

The defendant company operated a transportation business in Hong Kong (the “Company”) and the plaintiff (“Li”) was employed by the Company as a data processing officer on a monthly salary of HK$11,000 from 29 August 2011.

In October 2011, Li was admitted to hospital and diagnosed as having an umbilical hernia. She was also confirmed pregnant. She telephoned the Company’s director to inform him of her condition.

Li was discharged from hospital and granted sickness leave. A few days after her discharge, she was informed by the Company that her employment was terminated and that she would be given seven days’ salary in lieu of notice.

Li suffered a miscarriage a few days after her employment was terminated. She brought a claim against the Company on the grounds that they terminated her employment because of her illness and pregnancy and that she suffered physically and emotionally as a result. Her claim was for $170,500 being 18 months’ salary (subject to a deduction for unpaid maternity leave) and damages for injury to feelings.

The Judgment

The Company did not make an appearance at the hearing and so the facts were taken by the Court to have been admitted. Judgment was entered against the Company.

The Court found that umbilical hernia can be regarded as a disability and held that, by terminating Li’s employment based on her disability and pregnancy, the Company was in breach of the following provisions of the Sex Discrimination Ordinance (Cap. 480) (the “SDO”) and the Disability Discrimination Ordinance (Cap. 487) (the “DDO”):

S.8(a) SDO: “A person discriminates against a woman in any circumstances relevant for the purposes of any provision of Part 3 or 4 if on the ground of her pregnancy he treats her less favourably than he treats or would treat a person who is not pregnant.”

S.11(2)(c) SDO: “It is unlawful for a person, in the case of a woman employed by him at an establishment in Hong Kong, to discriminate against her by dismissing her, or subjecting her to any other detriment.”

S.6(a) DDO: “A person discriminates against another person in any circumstances relevant for the purposes of any provision of this Ordinance if on the ground of that other person’s disability he treats him less favourably than he treats or would treat a person who without a disability.”

S.11(2)(c) DDO: “It is unlawful for the employer, in the case of a person with a disability employed by him at an establishment in Hong Kong, to discriminate against that person by dismissing that person, or subjecting him to any other detriment.”

In assessing damages for injury to feelings, the Court applied the English authority of Vento v Chief Constable of West Yorkshire Police [2003] ICR 318, which identified, as guidelines, three broad bands of compensation for injury to feelings:

1. Top range: £18,000 – £30,000;

2. Middle range: £6,000 – £18,000;

3. Bottom range: £500 – £6,000.

These guidelines are subject to inflationary increases, as set out in the English case of Da’ Bell v. NSPCC [2010] UKEAT/0227/09.

In determining the amount of damages to be awarded to Li for her injured feelings, the Court noted that she had only been employed for two months before termination of her employment and therefore her injured feelings would not be substantial, although the Court did accept that Li cared about her employment and she must have felt betrayed. The Court also found that there was no medical evidence linking her miscarriage to the wrongful act of the Company. Accordingly, the Court decided to award Li the sum of HK$60,000 for her injured feelings, being the lowest band of the Vento guideline.

As for Li’s claim for 18 months’ of salary payment (she had still not found a job by the date of the hearing), this was not accepted by the Court because it held that she was under a duty to mitigate her losses and had given no explanation as to why she could not find a job. The Court considered that, based on her job title (data processing officer) and salary (at HK$11,000 per month), her job with the Company did not require any special skills. The Court awarded Li six months’ salary (at HK$66,000) as compensation for the time it would reasonably take her to look for another job, on the basis that it had taken her 6 months to find the data processing job with the Company.

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Commentary by: Jolene Reimerson Pinsent Masons E: jolene.reimerson@pinsentmasons.com

Employers are usually well aware of their rights under sections 6 and 7 of the Employment Ordinance (Cap. 57) which entitles them to terminate an employment contract by giving notice or making a payment in lieu of notice, without having to give the employee a reason for the termination. However, the case of Li Pui Ha is a timely reminder that an employer’s actual reasons for termination must not be discriminatory otherwise the termination may be held to be wrongful, even if the correct notice or payment in lieu of notice was given to the employee.

It is interesting that Li did not also bring a claim against her employer for breach of section 15 of the Employment Ordinance, which provides that after a pregnant employee has served notice of pregnancy on her employer, the employer must not terminate her employment (unless for reasons of summary dismissal). Section 15 does not state how an employee must ‘serve notice of pregnancy’ before protection against termination applies. For example, there is no express requirement that the employee must provide a medical certificate to the employer. Accordingly, giving notice of her pregnancy over the telephone would have been sufficient for Li to be protected under section 15.

There is a carve-out under section 15(1A) of the Employment Ordinance which allows an employer to dismiss a pregnant employee within the first 12 weeks of a probation period provided that the dismissal is for a reason other than the employee’s pregnancy. Of course, the reason for dismissal should not be on the grounds of sex, marital status, disability, family status or race of the employee (or the employer would likely be subject to a claim for unlawful discrimination), nor for any other prohibited reason such as involvement in trade union activities, undertaking jury service or being entitled to payment under the Employees’ Compensation Ordinance (Cap. 282).

It appears that Li decided to complain about her employer’s actions to the Equal Opportunities Commission (“EOC”). The EOC will only investigate claims of unlawful discrimination under the Sex Discrimination Ordinance (Cap. 480), Disability Discrimination Ordinance (Cap. 487), Family Status Discrimination Ordinance (Cap. 527) and Race Discrimination

Ordinance (Cap. 602). The EOC’s lawyers can act as a party’s legal representatives and try to conciliate complaints of unlawful discrimination, but it is not a court or tribunal and the EOC does not have the power to decide claims of discrimination. In order to bring a discrimination claim against an employer, an employee would need to commence proceedings before the Labour Tribunal or District Court, as Li did in this case.

For reasons unknown, Li’s employer did not attend the court hearing. This immediately put the employer at a significant disadvantage, because it was not able to present other reasons for Li’s dismissal (if there were any) and the court took the employer to have admitted the facts of the case as alleged by Li. The court considered that Li’s umbilical hernia could be regarded as a disability under the Disability Discrimination Ordinance and held that the termination of her employment was based on both her disability and pregnancy.

It is worth noting that “disability” is defined broadly in the Disability Discrimination Ordinance. It includes the total or partial loss of a person’s bodily or mental functions, a past or future disability, and even imputed disability (i.e. an assumption of a disability that a person does not actually have). Dismissal of an employee for any of these reasons, even if it is not the only reason for termination, could amount to unlawful discrimination.

While the damages awarded to Li by the court were not huge sums (mainly because Li had only been employed for two months prior to termination), employers should be aware that claims for unlawful discrimination can result in greater consequences in terms of damages payable to the employee for loss of earnings and injury to feelings, the time and costs spent in dealing with the litigation itself, and additional claims and fines for termination when prohibited under the Employment Ordinance. For example, breach of section 15 of the Employment Ordinance (dismissal of a pregnant employee) is also a criminal offence and an employer may be liable on conviction to a fine of between HK$50,001 to HK$100,000.

Employers should therefore ensure that all management and staff are aware that it is unlawful to discriminate against a person on the grounds of sex, marital status, pregnancy, disability (which is widely defined), family status or race, and that dismissal of an employee for a reason based on any of these grounds may result unlawful discrimination, whether or not the employer gives proper notice of termination or payment in lieu of notice to the employee.

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[Court of Appeal – CACV 191/2013 (on appeal from HCA 2210/2011)]

Tsit Wing (Hong Kong) Co Ltd & AnorPlaintiffs

– and –

TWG Tea Co Pte Ltd & AnorDefendants

Judgment of the Court of Appeal (the Hon Mr Justice Lam V-P, the Hon Mr Justice Barma JA and the Hon Mr Justice McWalters JA) dated 3 December 2014

Intellectual property – Trade marks – Infringement – Contextual analysis of defendants’ use of infringing marks applied

The Facts

The Plaintiffs are part of the Tsit Wing Group which was incorporated in 1956 in Hong Kong. The Plaintiffs have been operating cafes and restaurants in Hong Kong since 1994 using their trade marks, which consist of the acronym TWG deriving from the first letters of Tsit Wing Group besides overlapping ovals resembling coffee beans. The Plaintiffs’ “TWG” trade marks were registered in 2006 in Hong Kong. The “TWG” trade marks were subsequently registered in other parts of the world.

The Defendants are part of The Wellness Group which was incorporated in Singapore. They specialise in the lifestyle industry, particularly in the spa business, spa products and tea products. In 2008 the Defendants changed its name to TWG being an acronym of “The Wellness Group” and subsequently opened tea shops in Singapore and retail outlets in London, New York, Tokyo, and Abu Dhabi. In April 2011 the Defendants expanded to the Asian markets including China, Hong Kong, Taiwan and South Korea. The Defendants applied to register their “TWG” trade mark at the Trade Marks Registry of Hong Kong but was opposed by the Plaintiffs.

Notwithstanding the opposition and failure to agree with the Plaintiffs for a co-existence agreement, the Defendants opened a tea salon at the IFC Mall in Hong Kong on 8 December 2011 using a sign containing the TWG acronym. The Plaintiffs commenced trade mark infringement and passing off proceedings against the Defendants. The Court of First Instance ruled in favour of the Plaintiffs and granted, among others, an injunction restraining the Defendants from using the Plaintiffs’ marks. The Defendants appealed to the Court of Appeal, primarily on the grounds that the trial judge was wrong in deciding that the registered trade marks of the Plaintiffs are similar to the marks used by the Defendants.

The Judgment

The Role of the Words “TWG”

The Court of Appeal held that the dominant and distinctive component of a composite mark was most likely found in the words, i.e. spoken words “speak louder” than devices. Therefore, notwithstanding the fact that the two marks used by the Plaintiffs and the Defendants were not identical in design, the trial judge was not wrong in deciding that the dominant and distinctive component that was shared between both marks was the use of the acronym “TWG” in large letters across the centre of both marks. The Court reiterated that the acronym “TWG” was also a “distinctive” element because they indicate the origin of the goods on which the marks are displayed.

Factors contributing to the likelihood of confusion

The Court clarified the considerations that were taken into account when deciding whether or not the use of a mark would likely cause confusion. These considerations included:

• The likelihood of confusion must be appreciated globally, taking account of all relevant factors;

• The matter must be judged through the eyes of the average consumer of the goods or services in question, who is deemed to be reasonably well informed and reasonably circumspect and observant, but who rarely has the chance to make direct comparisons between marks and must instead rely on the imperfect picture of them he has kept in his mind, and whose attention varies according to the category of goods or services in question;

• The average consumer normally perceives a mark as a whole and does not proceed to analyse its various details;

• The visual, aural and conceptual similarities of the marks must normally be assessed by reference to the overall impressions created by the marks bearing in mind their distinctive and dominant components, but it is only when all other components of a complex mark are negligible that it is permissible to make the comparison solely on the basis of dominant elements;

• Nevertheless, the overall impression conveyed to the public by a composite trade mark may, in certain circumstances, be dominated by one or more of its components;

• Beyond the usual case, where the overall impression created by a mark depends heavily on the dominant features of the mark, it is quite possible that in a particular case an element corresponding to an earlier trade mark may retain an independent distinctive role in a composite mark, without necessarily constituting a dominant element of that mark; and

• If the association between the marks causes the public to wrongly believe that the respective goods or services come from the same or economically-linked undertakings, there is a likelihood of confusion.

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These conditions are subject to a contextual approach that must be applied generally when assessing the likelihood of confusion. The Court of Appeal emphasised that the relevant context in this case was the circumstances in which the Defendant used its signs and it was irrelevant to consider how the Plaintiffs had made use of their marks.

Notional and fair usage of marks

The Defendants argued that although the registered trade mark of the Plaintiffs was registered without any limitations on colour, the colours actually used by the Plaintiffs when displaying the registered trade mark should be taken into account in the Court’s analysis. This was rejected by the Court of Appeal, which held that parties are allowed notional and fair usage of marks which they have the exclusive right of use over. In the case of the Plaintiffs, even though the trade mark was registered without any limitation on colour, the Plaintiffs had the right to use the mark with whichever colours they saw fit. Hence, while the difference between the marks used by the Plaintiffs and the Defendants would be more distinct if colour was introduced into the analysis, the actual difference in colour of the marks used by the Plaintiffs

and Defendants could not be relied on by the Defendants to contend that there was low or no likelihood of confusion despite the presence of other similarities.

Moreover, the Court of Appeal noted that while the registered trade mark of the Plaintiffs was often accompanied with the “Tsit Wing” name when used or displayed, this did not reduce or modify the Plaintiffs’ exclusive right over the mark. Upon registration of a trade mark, a registering party receives the benefit of notional and fair usage of the registered trade mark alongside its exclusive right of use. Simply because the trade mark is actually used in a particular manner does not displace or compromise the registering party’s exclusive right over the registered trade mark.

Decision

The Court of Appeal upheld the decision of the High Court, finding that the trial judge had applied the correct principles of law in determining the similarity of the marks in question and the similarity of the goods in relation to which the Plaintiffs’ marks had been registered and the Defendants’ mark used.

Commentary by: Francois Tung Pinsent Masons E: francois.tung@pinsentmasons.com

This is an appeal from a case on which we last reported in Issue 7 (January 2014). In this appeal, the Defendants focused primarily on attacking the trial judge’s finding that the registered trade marks of the Plaintiffs are similar to the signs used by the Defendants.

In an appeal, the role of the appellate court is not to re-try the case but to review the judgment of the trial judge. Many litigants often argue that a trial judge has incorrectly applied a legal test and therefore has come to the wrong conclusion. However there is often a misunderstanding by litigants when it comes to refuting a judge’s “value judgment” where the judge is assessing a complex bundle of mixed facts and law. An appellate court would not re-apply such legal tests unless there are errors in principle or the trial judge had in fact applied the wrong test altogether. Following this, an appellate court therefore would not reverse a judge’s decision unless it can find that there existed such an error in principle.

In this case, the Court of Appeal seemed to place more weight on the right of exclusive use over a registered trade mark because it is one of the fundamental reasons that a company would register a trade mark. The Court rejected all arguments relating to the actual use of the trade mark and looked instead at the registered version of the trade mark. The actual uses (i.e. with the addition

of colour or the addition of the words “Tsit Wing”), were seen as notional and fair uses of the registered trade mark. However, while the argument regarding colour makes sense, it seems almost contradictory that the Court would assume that the inclusion of the words “Tsit Wing” could be considered “notional or fair use” of the registered trade mark, particularly given the court’s emphasis on the importance of the words in its analysis of the TWG acronym.

As a result of losing this appeal, the first Defendant had to, among other things, change its shop logo located at the IFC Mall and remove from its website references to activities in Hong Kong bearing reference to the infringing names and marks. The consequences suffered by the Defendants demonstrated the importance of conducting due diligence before a trade mark is adopted. Businesses that intend to expand overseas must ensure that they conduct appropriate searches against a proposed mark to assess the potential infringement of third party rights. It is also clearly unwise, as in the case of the Defendants, to knowingly adopt an infringing mark without securing a co-existence agreement or obtaining consent from the trade mark owner when the consequences of failing to do so can directly impact on the brand image and global strategy of the business.

As at the date of writing, the Defendants were granted leave to appeal to the Court of Final Appeal and a hearing has been set for January 2016. This upcoming case will inevitably be important in clarifying the state of trade mark law in Hong Kong, and involves issues which should considerably clarify and simplify the application of the law. We will report back if the appeal goes ahead!

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[High Court of Justice of England and Wales, Chancery Division – [2014] EWHC 3354 (Ch) – Case No. HC14C01382]

(1) Cartier International AG(2) Mont Blanc – Simplo GMBH(3) Richemont International SA

Claimants

– and –

British Sky Broadcasting Limited and OthersDefendants

– and –

Open Rights GroupIntervener

Judgment of the High Court, Mr Justice Arnold dated 17 October 2014

Intellectual property – Trade marks – ISPs – Infringing websites – Jurisdiction – Injunction

The Facts

The Claimants own a large number of United Kingdom Registered Trade Marks for luxury goods. The Defendants are the five main retail internet service providers in the UK, together having a market share of 95% of UK broadband users. The Claimants seek orders requiring the ISPs to block, or at least impede, access by their respective subscribers to six websites which advertise and sell counterfeit goods (“Target Websites”). It was not in contention, and the Judge found, that the operators of the target websites infringed the Claimants’ trade marks. The websites are targeted at (amongst others) UK consumers, as: they are in English; sterling is among the currencies in which prices are displayed, and orders from the UK are accepted and fulfilled. There is no suggestion that the ISPs have infringed the trade marks or are liable for infringements by the operators of the websites.

Over the past three years, a number of orders have been made requiring the ISPs to block, or at least impede, access to websites offering infringing music and films pursuant to section 97A of the Copyright, Designs and Patents Act 1988 (“1988 Act”). However, this is the first occasion on which an application for a website-blocking order against ISPs in order to combat trade mark infringement has been made anywhere in the European Union (with the possible exception of a Danish application). There is no statutory counterpart in the field of trade marks to section 97A of the 1988 Act. For this reason the Open Rights Group were permitted to intervene.

The Judgment dealt with five questions:• Does the court have jurisdiction?• If so, what are the threshold conditions?• Are those conditions satisfied in the present case?• If so, what are the principles to be applied in deciding whether or

not to make an order?• Applying those principles, should such orders be made in the

present case?

The Judgment

Jurisdiction

When implementing Article 8(3) of the Information Society Directive by amending the 1988 Act to insert section 97A, the UK did not pass any legislation to implement the third sentence of Article 11 of the Enforcement Directive. This is despite the fact that the effect of that third sentence is to extend the requirement imposed on Member States by Article 8(3) of the Information Society Directive with regard to copyright and related rights to all forms of intellectual property. The ISPs contend that, as a consequence, the Court has no jurisdiction to make orders of the kind sought by the Claimants.

The Claimants relied on section 37(1) of the Senior Courts Act 1981 which provides:“The High Court may by order (whether interlocutory or final) grant an injunction… in all cases in which it appears to be just and convenient to do so.”

The Judge was of the view that the wide jurisdiction granted to the Court by section 37(1) was not limited by the approach to implementation of the Enforcement Directive. Injunctions may be granted more widely than solely against infringers of the right in question. In L O’real SA v eBay International AG [2009] EWHC 1094 (Ch), Arnold J. concluded that, if the third sentence of Article 11 required the grant of an injunction to prevent future infringements against an intermediary who was not an infringer, then that provided a sufficient reason for a court of equity to exercise its power to grant an injunction to protect an intellectual property right which has been infringed.

As to what the third sentence of Article 11 required, the Judge referred the question to the Court of Justice of the European Union (“CJEU”). The CJEU concluded that the jurisdiction conferred by the third sentence of Article 11 was not limited to bringing infringements to an end, but extended to preventing further infringements. This served to fortify Arnold J’s earlier view that he had jurisdiction to grant an injunction in the current type of case.

Threshold conditions

Extrapolating from the cases concerning copyright infringements, the Judge held that similar threshold conditions must be satisfied in order for a website blocking injunction to be granted in a trade mark case. First, the ISPs must be intermediaries within the meaning of the third sentence of Article 11. Secondly, either the users and/or the operators of the website must be infringing the claimants’ trade marks. Thirdly, the users and/or the operators of the website must use the ISPs’ services to do that. Fourthly, the ISPs must have actual knowledge of this.

The Judge held that the threshold conditions were met. The ISPs have an essential role in these infringements, since it is via the ISPs’ services that the advertisements and offers for sale are communicated to 95% of broadband users in the UK. It is immaterial that there is no contractual link between the ISPs and the operators of the Target Websites.

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Are the threshold conditions satisfied?

There are a number of methods of attempting to block access to websites that can be employed by providers such as the ISPs. These include: DNS name blocking; IP address blocking using routers; Deep Packet Inspection (DPI) – based URL blocking and two-stage systems (usually combining two of the previous techniques). Each of the techniques described above can readily be circumvented by users who have a little technical knowledge and the desire to do so. But, whilst the Judge accepted that it is pointless to grant a remedy which will be wholly ineffective, he did not accept that it is incumbent on the right holder to demonstrate that the remedy sought will be effective in reducing the overall level of infringement of its intellectual property rights.

The Judge held the following issues of proportionality were particularly important:

1. The comparative importance of the rights that are engaged and the justifications for interfering with those rights.

2. The availability of alternative measures which are less onerous.

3. The efficacy of the measures which the orders require to be adopted by the ISPs, and in particular whether they will seriously discourage the ISPs’ subscribers from accessing the Target Websites.

4. The costs associated with, and implementing, those measures.

5. The dissuasiveness of those measures.

6. The impact of those measures on lawful users of the internet.

7. The substitutability of other websites for the Target Websites.

Application to the present case

The orders would not interfere with the provision by the ISPs of their services to their customers. The orders would not require the ISPs to acquire new technology: they have the requisite technology already, both for complying with existing section 97A Orders, as well as implementing parental control services.

The main effect of the orders would be to impose additional operating costs on the ISPs, but these were found to be modest, not least in comparison to the likely profits of the ISPs’ business.

The ISPs complained that the Claimants should be required to progress their notice and takedown efforts, rather than rely on involving the ISPs in injunctions. The Claimants contended that notice and takedown is ineffective because, as soon as an offending website is taken down by one host, the almost invariable response of the operation is to move the website to a different host.

Referring to expert evidence adduced on behalf of the Claimants which showed the marked reduction of infringement following the execution of section 97A orders, the Judge was persuaded that the injunction if granted would likely be effective.

The Judge ordered the injunctions, and, so that they would not be open-ended, incorporated a “sunset clause” such that the orders will cease to have effect at the end of a defined period (he suggested 2 years) unless either the ISPs consent to the orders being continued or the Court orders that they should be continued.

Costs

Following the section 97A precedent, the rights holders bear the costs of the application (other than costs occasioned by the ISPs’ resistance to an order), while the ISPs bear the costs of implementation. Similarly, the rights holders bear the costs of monitoring the targeted websites after implementation of the order and notifying the ISPs of updates, while the ISPs bear the costs of implementing such updates.

The Judge did not rule out the possibility of ordering the right holder to pay some or all of the implementation costs in an appropriate case.

See overleaf commentary by: Peter Bullock Pinsent Masons E: peter.bullock@pinsentmasons.com

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Commentary by: Peter Bullock Pinsent Masons E: peter.bullock@pinsentmasons.com

Richemont’s successful application for an injunction in the London High Court against Britain’s leading ISPs requiring them to take procedures to block their customers’ free access to websites offering goods infringing Richemont brands’ trade marks is an interesting development. Similar injunctions have been awarded by the English courts and many others across Europe requiring ISPs to block file sharing sites breaching copyright in films and music. However, that followed established wordings in copyright legislation – notably section 97A of the UK’s Copyright, Designs and Patents Act 1988. Arnold J held that it was possible, and appropriate in this case, to grant such an injunction in favour of trade mark rights based on the Court’s inherent jurisdiction to grant injunctions incorporated into section 37(1) of the Senior Courts Act 1981. In doing so, the Judge needed to circumvent numerous arguments raised by the ISPs, including jurisdictional questions peculiar to European law and a prevailing protection in favour of ISPs to the extent they act as a “mere conduit” for internet traffic which turns out to be infringing.

The obvious question for those in Hong Kong is – could such relief be awarded here? My answer is ‘yes – in the right case’. Essentially, the Hong Kong Courts have an identical inherent jurisdiction to grant injunctions as the English Courts. There is also the absence of the potentially complicating aspect of EU

laws and their local enactment, which gave rise to jurisdictional arguments in Richemont’s case. In Hong Kong, there is currently no ‘mere conduit’ protection for ISPs; although such legislation is shortly to be considered by LegCo. However, as Richemont’s case did not involve any claim that the ISPs were themselves liable or responsible for the underlying infringements, the ‘mere conduit’ arguments were not engaged. The ISP lobby is probably weaker in Hong Kong than it is in the UK.

Furthermore, in the past the Hong Kong Courts have found it very easy to pick up on remedies in favour of rights holders which were hard won in the English Courts but readily imposed by the Hong Kong Court of First Instance. In 2001, in e-silkroad.net v Icered, the Hong Kong Court ordered the delivery up of IP addresses of anonymous posters responsible for defamatory content by the proprietors of an internet chatroom website notorious in the territory at the time. This was a carbon copy of a slightly earlier order made by the English High Court in Totalise plc v Motley Fool (2001).

An area which exercised the English judge in Richemont’s case was whether it was fair to impose the cost of blocking offending sites upon the ISPs, especially where the rights holders technically had alternative legal means at their disposal (actions to take down websites and transfer to themselves offending URLs). In England Richemont was able to convince the Judge that although those legal means were available, their effectiveness was so limited as to mean that they presented no commercially viable route to enforcement. It is likely that this balancing exercise would reveal a similar result in Hong Kong.

Notes

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