Hong Kong: Asia IP & TMT: Quarterly Review - First Quarter 2015

Last Updated: 9 April 2015
Article by Rosita Li, Benjamin P.K. Choi, Xiaoyan Zhang, Nicola Kung, Karen H.F. Lee and Victoria Armstrong
Most Read Contributor in Hong Kong, October 2018

The Draft Copyright Tribunal Rules – Not There Yet

By Rosita Li, Partner, Mayer Brown JSM, Hong Kong Victoria Armstrong, Registered Foreign Lawyer (England and Wales), Mayer Brown JSM, Hong Kong

Background to the Copyright Tribunal

The Copyright Tribunal (the "Tribunal") is an independent quasi-judicial body that was established on 1 December 1997 under section 169 of the Copyright Ordinance (Cap. 528) (the "CO").

The main function of the Tribunal is to decide disputes relating to licences or licensing schemes offered by licensing bodies relating to copyright works administered by them. Any suspected unreasonable licence refusal under a licensing scheme, or suspected unreasonable licence terms may be referred to the Tribunal. The Tribunal can also decide on matters which do not involve collective licensing bodies. For example, the Tribunal can give consent on behalf of an owner of the right of reproduction concerning a performance, or on behalf of an owner of performers' rental right if the identity or whereabouts of such right owner cannot be ascertained.

Decisions of the Tribunal (hearings of which are normally conducted in public) are appealable to the Court of First Instance on points of law. However, to date, there has not been a single final decision issued by the Tribunal1. Limited use of copyright tribunals is not particular to Hong Kong however. For example, before legislative amendments2 were made in 2009 to increase its efficiency and effectiveness, the Singapore Copyright Tribunal heard only three cases from its inception in 1987. This figure can be compared to that of the UK Copyright Tribunal (following the implementation of the Copyright Tribunal Rules 2010 No. 791 of the UK Copyright Tribunal (the "UK Copyright Tribunal Rules")) which, in 2013-2014 alone rendered four final decisions.

It is little wonder, therefore, that the Hong Kong government is following the UK example in an attempt to promote the Tribunal as an effective dispute resolution forum by attempting to improve efficiency and cost-effectiveness and encouraging parties to first turn to the Tribunal before having recourse to courts. After all, with technological advancements allowing a substantial broadening of access to copyright works, it would be expected that the number of related disputes would increase dramatically year on year. The fact that this has not happened suggests that there is either little awareness of the Tribunal itself, little understanding of its role as an effective dispute resolution forum or, most likely, its current procedures are over complicated and render it inaccessible, especially for small businesses and individuals.

The Rules

The rules regulating the procedures for making references and applications to the Tribunal are provided under the current Copyright Tribunal Rules (Cap. 528C). In August 2009, following the enactment of the Copyright (Amendment) Bill 2007 and the implementation of the Civil Justice Reform in Hong Kong in April 2009, the Hong Kong Government invited views on the direction and shape of a new set of rules (the "Draft Rules"), in order to modernise the practice and procedures of the Tribunal. Having taken into account the views submitted as well as the latest local and overseas dispute resolution practices and developments, for example the UK Copyright Tribunal Rules 2010 and the enactment of the new Arbitration Ordinance (Cap. 609) in Hong Kong in 2010, the Draft Rules were published for further consultation on 9 December 2014. In a press release by the Intellectual Property Department (the "IPD"), it was noted that:

"The Draft Rules seek to make proceedings before the Tribunal as flexible, convenient and cost-effective as possible in accordance with contemporary dispute resolution practices." 3

Although this further public consultation period was scheduled to end on 9 February 2015, it appears, at the time of writing, that it has not yet been officially 'closed' by the IPD. As such, final submissions have not yet been released.

Following the closure of the consultation period, the Chief Justice will examine the submissions received and the Draft Rules, as appropriately revised, will be tabled before the Legislative Council.

For the purposes of consultation, the Draft Rules have been split into seven sections for review, namely: principles of the civil justice reform, standardised procedures and forms, active case management, alternative dispute resolution, single member adjudication, practice directions and self-contained rules. Although no final submissions have been published in respect of the latest period of consultations, submissions from the 2009 consultation are available and draft submissions have been shared between stakeholders.

Principles of Civil Justice Reform

The Draft Rules provide that the Tribunal must seek to give effect to the underlying objectives of Civil Justice Reform. Given that the proceedings before the Tribunal are intended to be less formal than court proceedings, the Draft Rules do not follow the practice and procedure of the court entirely. The Draft Rules adopt a few areas from the Civil Justice Reform, in particular active case management, the use of statements of truth to verify claims and encouraging alternative dispute resolution.

Comments in the 2009 submissions of stakeholders suggested that the proposed imposition of costs sanctions, in relation in particular to defective documentation, could discourage the use of the Tribunal. The Draft Rules provide the Tribunal with the ability to issue directions to rectify defective documents. Other suggestions made in 2009 included not imposing cost sanctions against unrepresented parties. This suggestion does not appear to have been taken on board and instead 'special circumstances' are set out under which costs sanctions may be ordered in relation to deliberate misuse of the Tribunal or misconduct in the proceedings.

Standardised Procedures and Forms

Standardised procedures and forms for all types of applications and references under the Draft Rules are intended to streamline procedure, thereby making the Tribunal more accessible for users. This appears to discount the 2009 concerns raised by some stakeholders that the use of one application form may, in fact, cause more complexity and confusion, given the range of different matters before the Tribunal. The majority of stakeholders supported the notion of a standardised procedure, which should have the effect of being more user-friendly, and can be likened to the use of a standardised application form and the approach adopted in the UK Copyright Tribunal Rules.

However, it is arguable that the forms featured in the Schedules of the Draft Rules are still too complicated. For example, one draft stakeholder submission suggests that the forms use confusing terminology (especially for unrepresented parties), for example "originator", rather than "applicant" and requiring the said "originator" to select whether the application is "inter partes" or "ex parte".

Further, there is no specific provision for a fast track system for simple cases of low financial value, in order to improve accessibility (unlike in the UK).

Active Case Management

Under the Draft Rules, the Tribunal is given the power to make orders or directions as to the conduct of proceedings. This power can be exercised at any stage of the proceedings, whether on the Tribunal's own initiative or at the request of one of the parties. No general guidance is provided in relation to case management, though once the rules are adopted it is to be expected that guidance will later follow. Practice directions, for example, (as discussed further below) may help reduce costs and delays. This would, arguably, alleviate the general concern put forward by the Law Society of Hong Kong in its 2009 submission that there is a risk that the Tribunal could, in fact, add to the up-front costs for parties to disputes.

Alternative Dispute Resolution

Alternative dispute resolution appears to be encouraged and facilitated by the Draft Rules, with no threat of a cost sanction should the parties fail to mediate. It is suggested that the Tribunal should have flexibility to make "considering settlement and/or mediation" a procedural step.

Single Member Adjudication

Under section 172(1A) of the CO, in order to increase flexibility and efficiency in the disposal of certain proceedings, all interlocutory applications may generally be heard by a single member of the Tribunal. This dispenses with the need to engage a fully constituted Tribunal (at least three members4), thereby capturing the spirit of Civil Justice Reform.

Previous views submitted by stakeholders have been taken into account in the latest version of the Draft Rules, with the requirement that the single member of the Tribunal must be legally qualified (in fact, the Draft Rules state that the single member must be qualified for appointment as a District Judge under section 5 of the District Court Ordinance (Cap. 336)). However, at this point, there is still no requirement in the Draft Rules that key members of the Tribunal should be experienced in copyright matters. This is likely to be requested in the latest stakeholder submissions, given the complex nature of copyright licensing arrangements.

Practice Directions

The Draft Rules provide that the Tribunal may issue non-mandatory administrative guidelines setting out practice and procedure, to complement the Draft Rules. The original consultation unveiled stark differences in opinion as to these guidelines, with some practitioners favouring a comprehensive set of rules, so as to avoid the need for additional practice directions, whereas some felt that instead reference could simply be made to existing court procedure. Others favoured a flexible approach.

It seems that, given the legislative intent is to provide efficiency, flexibility and to avoid excessive cost, whilst having regard to the Civil Justice Reform, the Tribunal should not be obliged to follow existing court procedure. However, a set a guidelines would facilitate accessibility and would be a helpful supplement to the current Draft Rules.

Self-Contained Rules

The Draft Rules will no longer feature cross-references to the Arbitration Ordinance. As currently drafted, users are required to refer to a separate piece of legislation (which, it should considered, is likely to be subject to amendments from time-to-time).Given that this has the potential to cause confusion, a self-contained approach for the Draft Rules seems sensible, especially in view of the objective to ensure the Draft Rules are user-friendly and aid efficiency. Further, doing away with cross-referencing allows the Tribunal to take a less formal approach than the Court, thereby increasing accessibility and flexibility.

Conclusion

Although the submissions to the latest period of consultation are yet to be published, when considering the Draft Rules in light of the original 2009 submissions, it seems likely that there is still a bit more fine-tuning required.

The 2009 submissions highlighted the importance in monitoring the UK experience closely. Given the encouraging level of uptake of the UK Copyright Tribunal as a forum for dispute resolution, in the years following the implementation of the UK Copyright Tribunal Rules it is hoped that the changes, proposed in the Draft Rules should, therefore, have a similar effect in Hong Kong.

Burberry v Polo Santa: A Recent Case on the Standard of Use Required to Resist Non-Use Revocation

By Benjamin Choi, Partner, Mayer Brown JSM, Hong Kong Nicola Kung, Associate, Mayer Brown JSM, Hong Kong

The recent case Burberry Limited and Burberry Asia Limited v Polo Santa Roberta Holding HongKong Limited (HCMP 965/2014) is a salutary reminder of the genuine and actual use required of a registered mark to keep it safe from non-use revocation. In these proceedings before the Court of First Instance, the trade mark owner was unable to show any genuine use of a trade mark after its registration, so the court revoked the trade mark on the third anniversary of its actual date of registration.

Background

Burberry has its famous check pattern registered as a trade mark in Hong Kong in various classes, including class 18 for leather goods (the "Burberry Check"). The Defendant ("Polo Santa") also owned a Hong Kong trade mark consisting of a check pattern (the "Polo Check Mark"). Burberry sought to revoke the Polo Check Mark.

Polo Santa acquired the Polo Check Mark in January 2012, by assignment (the "Assignment") from its affiliate Polo Santa Roberta Limited ("PSR Ltd"). Prior to the Assignment, Burberry had instigated proceedings against PSR Ltd in the High Court (HCA 1617/2010), for selling products that infringed the Burberry Check. Burberry obtained summary judgment in that action on 17 January 2012. The Assignment occurred on 2 January 2012, just a few weeks before the summary judgment.

On 16 April 2014, Burberry applied by originating summons to the Court of First Instance for an order that the Polo Check Mark be revoked for 3 years of non-use, or alternatively for a declaration of invalidity of the trade mark registration.

Under the Hong Kong Trade Marks Ordinance (Cap. 559) (the "TMO"), if it is established that there has been no genuine use of a registered trade mark in relation to the goods or services for which it was registered for a continuous period of at least 3 years, then the Registrar of Trade Marks or the court can make an order to revoke that mark (TMO s. 52(2)(a)). The 3 year period may begin any time from the date on which the trade mark in question was granted registration (TMO s. 52(8)).

In non-use revocation proceedings, the owner of the mark in question bears the burden of proving that the mark has been genuinely used by the owner or with his consent in the Hong Kong market during the relevant period.

In this case, Polo Santa was unable to satisfy the court that it had made any genuine use of the Polo Check Mark after its registration. The CFI held that the evidence of use produced by Polo Santa was insufficient to discharge their burden of proof. The CFI therefore concluded that the registration of the Polo Check Mark was to be revoked.

What was not satisfactory about polo santa 's evidence of use

The court was not satisfied with the evidence of use submitted by Polo Santa. In defending the proceedings, Polo Santa relied on two main pieces of evidence:

  1. Licenses: It had licensed two other entities to use the Polo Check Mark. One entity was another Hong Kong company run by Polo Santa's director ("Far East"). The other was a PRC company which sold handbags in Mainland China. Polo Santa asserted that these entities had been using the Polo Check Mark with its consent.
  2. Catalogue: Its licensees had sold large quantities of bags bearing the Polo Check mark. Polo Santa exhibited a 4 page handbag catalogue as evidence. The handbags shown in the catalogue had a small metallic badge bearing the Polo Check Mark. Polo Santa attempted to rely on the EU Court of Justice case Engelhorn KGaA v Office for Harmonisation in the Internal Market (Trade Marks and Designs) T-30/09, 8/7/2010, in which a catalogue was found to be appropriate evidence of genuine commercial activity involving the goods in question.

The court made the following rulings:-

Licenses

Polo Santa did not dispute that to resist revocation on the ground of non-use, the genuine use must have occurred in Hong Kong. The court concluded that their license to the PRC company for use of the mark in Mainland China was irrelevant.

Catalogue

Whilst the judge opined that catalogues are generally accepted as useful evidence of genuine commercial activity, the catalogue provided by Polo Santa was not enough to prove genuine use. The judgment clearly describes the differences between the Engelhorn catalogue and the Polo Santa catalogue. The Engelhorn catalogue contained specific information of a large number of shops offering the goods, including telephone numbers, fax numbers, postal addresses and internet addresses. This information would enable end customers to make purchases. In perceiving the Polo Santa catalogue, the judge stated that, "The catalogue is surprisingly sparse in content. The words "Polo Santa Barbara" appear but it contains no name, address, telephone number, email address or any other contact details of the defendant or any other identity". In other words, there was nothing in the Polo Santa catalogue suggesting that the goods were being offered to end customers for sale.

It is notable that the judge specifically pointed out that there was no contact information for the defendant in the Polo Santa catalogue. When assessing whether a catalogue or brochure can constitute satisfactory evidence of use in non-use revocation proceedings, the court will be actively looking for signs that link the evidence presented to the party relying on it. The defendant's contact information may constitute evidence that the goods are truly intended to be offered for sale to consumers by them.

The absence of documents

The judge also noted Polo Santa's failure to provide certain types of supporting evidence and took the view that the absence of these documents was "highly significant". Polo Santa had never submitted any:

  • Documents evidencing in the manufacture of the goods;
  • Documents evidencing the actual manufacture, marketing or sale of the goods, e.g., manufacturing records, commercial invoices, advertisements, retail invoices and receipts;
  • Internal documents e.g., sales records, vouchers and ledgers; or
  • Statements from shop assistants saying that the products had been offered for sale under the Polo Santa mark.

The judge concluded that given the scale and regularity of the sale of products that Polo Santa alleged, it was remarkable that the catalogue was the only evidence that Polo Santa was able to produce.

Trade mark owners can't get away with token use

This case sheds light on the kind of evidence of use the court will be expecting in non-use revocation cases, and in doing so, clarifies the standard of use required of a registered trade mark. The judgment helpfully lists out certain types of documents that would assist a trade mark owner in resisting non-use revocation proceedings, e.g., documents evidencing manufacture and sale, internal records, catalogues containing the defendant's contact information, and statements from employees stating that products had been offered for sale under the mark. Brand owners are therefore well reminded to make and preserve these documents and records, in order to safeguard their marks from non-use revocation.

The Impact of Improved Administrative Patent Enforcement Rules for Foreign Patentees

By Xiaoyan Zhang, Counsel (New York, USA), Mayer Brown JSM, Hong Kong

On January 27, 2015 the State Intellectual Property Office ("SIPO") released a Draft on Patent Administrative Enforcement Rules (the "Draft") for public comment. The Draft aims to improve the current patent administrative enforcement rules which took effect on February 1, 2011 by adopting several new measures, including enhancement of patent enforcement in the e-commerce context and acceleration of patent administrative proceedings. Due to the nature of administrative patent enforcement both in theory and practice, these proposed improvements will affect a small number of foreign patentees at most.

1. The Limitations of Administrative Patent Enforcement in China

China is one of the few jurisdictions where a patentee is offered the option to assert a patent infringement claim through an administrative action as a quicker and more cost-effective alternative to court proceedings. Administrative agencies, however, are authorized to grant only injunctive relief (not monetary damages) and may refuse to accept cases on discretionary grounds such as complexity. Since most of the foreign patentees own high-stake complex invention patents, they may not adequately benefit from this remedy. Not surprisingly, among the 24,000 administrative patent cases filed in 2014, only 15% involved invention patents and only 6% were brought by foreign patent owners. Whether the improvements in the Draft are significant enough to lure more foreign patentees to seek administrative enforcement while foregoing monetary damages remains to be seen.

2. Enhanced Administrative Patent Enforcement in E-Commerce: A Paradise in Theory or Reality?

Several provisions of the Draft now offer an improved legal framework to stop patent counterfeits in e-commerce platforms. Specifically, an administrative authority may order e-commerce website owners to delete cookies, remove links or block webpages containing patent counterfeit products. As part of an effort to increase transparency, administrative authorities are further required to publish their decisions online. Since online shopping has been gaining increased popularity in China—one of the world's largest consumer economies— this improvement, at least in theory, will offer speedy relief to foreign patentees who own simple utility and design patents that are vulnerable to infringement online.

Some commentators, however, argue that the lack of specificity of the Draft concerning e-commerce enforcement may ultimately hinder its implementation, particularly since there is inconsistency in the application of the procedure and the quality of decisions from city to city. How each local agency will respond to this improvement remains to be observed. Generally speaking, administrative enforcement agencies in first-tier cities such as Shanghai, Beijing, and Guangzhou have a reputation for being more effective and professional than those in small cities. Nonetheless, foreign patentees should consider adopting a program to systematically monitor the major e-commerce websites in China for potential infringing activities, while simultaneously building relationships with local legal counsel who are experienced in administrative patent enforcement.

3. Quicker Administrative Proceedings Demand Better Preparations

The Draft shortens the duration of administrative patent proceedings from the current four month limit to three months (for invention and utility patent proceedings) and two months (for design patent proceedings) with the possibility of a one month extension upon approval of the department chief. The Draft also shortens the deadline for a party to submit a defense statement and statement of opinion, and the deadline for the administrative agency to enter the case on file after receiving a complaint from 15 days to 10 days.

Notably, local administrative agencies rarely follow the timelines set forth by the SIPO, and many agencies in local provinces operate under their own timelines. Even if the revised twoand three-month timelines were to be strictly enforced, foreign patentees would face new challenges brought by the shorter deadlines in an inconvenient forum. Thus foreign patentees should be thoroughly prepared by gathering as much evidence as possible before officially initiating an administrative action.

Conclusion

Foreign patentees which may be aware of online distribution channels of infringing products should reassess the relevance and utility of administrative patent enforcement in light of the Draft, consider adopting a monitoring program that targets major e-commerce websites, and be well-prepared before filing a complaint, preferably before an administrative agency in one of the first-tier cities.

Footnotes

1 There are 11 applications officially "under progress", for example application No. 1/2010 for a grant of licence under section 163

CO (i.e., reference to the Tribunal in relation to an expiring licence) and application No. 1/2011 for a grant of licence under section 156(3) CO (i.e., reference to the Tribunal in relation to a licensing scheme), the most recent application to the Copyright Tribunal, however there are currently no scheduled hearings. Of these 11 applications 7 have in fact been withdrawn or discontinued. In relation to the remaining 4 applications, Interlocutory application hearings have taken place and interim relief was ordered by the Tribunal (the latest being on 30 August 2013 in relation to an application for the grant of a licence under section 155(3) CO and/or section 156(3) CO (i.e., reference to the Tribunal in relation to a proposed or existing licensing scheme)).

2 Amendments were made to the Copyright Act (Cap. 63).

3 http://www.info.gov.hk/gia/general/201412/09/P201412090348.htm

4 Section 172(1) CO.

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Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

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