A Discussion on Trademark & Copyright Infringement cases in Hong Kong

 

A discussion on trademark and copyright infringement CASES in Hong Kong

Cases of Infringement on Burberry, Polo Ralph Lauren and Swarovski

Cases of Intellectual property (IP) infringements of international famous brands have been reported and tracked down by the Hong Kong Customs and Excise Department in the past few years, and the infringers were convicted and sentenced to jail. “Swan” is the most recently reported case. This case, still in investigation, concerns a retailer claiming a low-cost artificial crystal as “Diamond Level Austrian Crystal” in an attempt to defraud customers. The “Swan” brand operated seven branches within the mode of short-term lease bargaining sales and the shops were located in the main tourist spots areas of Hong Kong. The shops charged HKD2,000 for  synthesized crystals whose real cost was  only  HKD20.

A local press media (Ming Pao) reporter called the shop for details of the crystal and the staff informed them that the product they sold was same as the product sold by Swarovski - a famous jewelry brand. However, Swarovski claimed that Swan has no any relationship with them.  It is believed that the Swan staff’s misrepresentation breaches the “Trade Descriptions Ordinance”. Furthermore, it was found that there are some similarities between the interior design of shops, package design and jewelry style of Swan and Swarovski. Swan is therefore suspected to have misled customers by infringing the IP of Swarovski. The Customs and Excise Department of Hong Kong is investigating Swan with regard to the “Trade Descriptions Ordinance”.

The same infringer was also involved in another IP infringement cases. The affected brand was “Polo Ralph Lauren”. The infringer was also found to own 3 shops with names and logos similar to the famous Polo Ralph Lauren. Two of these shops are called “Polo Santa Roberta” and the remaining one is called “Beverly Hills Polo Club”. A reporter also made a call to Beverly Hills Polo Club to enquire about its relationship with Polo Ralph Lauren and the staff claimed that they were selling “another series” from the authentic Polo brand.

Indeed, the brand Polo Santa Roberta was sued by another famous brand, Burberry, for infringing its handbag pattern design in 2009. The former owner of Polo Santa Roberta was charged with 28 items of managing counterfeit product and was sentenced to 8 month imprisonment. Figure 1 shows the products of Burberry and Santa Polo Santa Roberta in 2010. The checked patterns of two bags look very alike. However, the price of an authentic Burberry was HKD5,200 while the price of Polo Santa Roberta was HKD1,680. This checked pattern design (trademarked) was registered by Burberry. Therefore, even if other retailers use the same or similar pattern without copying the name of Burberry, this act is still actionable for IP infringement. Nevertheless, Polo Santa Roberta is still operating with a new owner and logo design in 2013.

Figure 1: Comparison of Burberry and Polo Santa Roberta Product
Source: Ming Pao Daily
How is Intellectual Property Protected in Hong Kong?

The Customs and Excise Department is the only official department (“The Department” hereafter) in charge of investigation and imposing criminal sanctions against trademark and copyright infringements in Hong Kong. The Department takes action on the basis of three sets of ordinances.

1. The Copyright Ordinance, Chapter 528
2. The Trade Descriptions Ordinance, Chapter 362
3. The Prevention of Copyright Piracy Ordinance, Chapter 544

The Department adopts enforcement on both the supply and retail level to work against pirated and counterfeits goods. Therefore, the Department intended to block infringement activities in the areas of import, export, manufacturing, wholesale, distribution and retail.
Aside from enforcement by the Department, intellectual property owners are also partly responsible for the protection of their own IP. The first step to protect IP in Hong Kong is to make a registration of trademarks or prove the subsistence of copyright alleged to have been infringed as advised by the Department. Then, IP owners of copyright or trademarks should report to the Department with the information shown in figure 2.
Figure 2: Information needed for reporting copyright infringing and trademark counterfeiting activities
Copyright infringement and trade descriptions related problems are the two major IP infringements in Hong Kong. However, thanks to the authority’s strict enforcement of the law, IP infringement is not a rampant problem in Hong Kong. This is also the main reason for a large number of Chinese Mainlanders travelling to Hong Kong to purchase luxury items even though the relevant brands operate retail stores in China. According to the Customs and Excise Department, the numbers of case of the two aforementioned problems have dropped drastically since 2010 as illustrated on figure 3 and figure 4.
Figure 3: Enforcement result of copyright cases of the Customs and Excise Department
Figure 4: Enforcement result of trade descriptions cases of the Customs and Excise Department
IP Owners Still Need to be Cautious in Protecting Their Rights

Although the Hong Kong Customs and Excise Department have successfully lowered the number of cases against copyright and trademark infringement, the problem will never be completely eliminated. This is because the profit margin of counterfeit and pirated products is attractive. Based on the Customs & Excise Department’s statistics, the numbers of cases and arrested persons have decreased while the total value of counterfeit products seized increased, in the past two years. Moreover, even though the law endows the protection on the original registered copyright or trademark, it can only prohibit the selling of the corresponding counterfeit product - it is unable to stop the business operation of the infringer. The Polo Santa Roberta is still in operation today, even though Burberry successfully claimed against them for infringing its pattern design in 2009. Therefore, IP owners should register all their copyright, patents and trademarks to the regional IP departments, where their product or service is available. It is advisable to consult a legal adviser or IP management consulting expert on this issue.

 

Feature Article

  • Introduction of Patent Rights in China II

    Introduction of Patent Rights in China II

    Scope of the China Patent Law and Application Procedures

    Patent rights are one type of intellectual property right. The current Patent Law in China protects three types of work including inventions, utility models and designs. The technical aspect of a product is the  primary  protected content of inventions and utility models, whereas patents of design concern new designs of shape, pattern or a combination of the two. The authority overseeing patent issues, including patent application, is the State Intellectual Property Office of P.R.C. (SIPO). The examination and approval of a patent is based on a first-to-file principle. Starting from the filing date, a patented invention  can enjoy a 20 year protection term whilst the term for a utility model and design patent is limited to 10 years.

    The general process of applying for a patent right in China is illustrated below; details of each patent type will be discussed in later sections.

    Step I: Check if the patent has been registered or not before making an application.

    Step II: Documents preparation:

    · Inventions &Utility models – Prepare two copies of all the following documents:

    a) Application form

    b) Summary (with picture if applicable)

    c) Specification (with picture if applicable and patent claim form)

    · Design – Prepare two copies of all the following documents:

    a) Application form

    b) Picture or photo of the design (color picture should be submitted if color pattern is required to be protected

    c) Specification for design checking

    Step III: Make an application to State Intellectual Property of P.R.C. (SIPO) through paper document or electronic form. One application form can only be used to apply for one patent.

    Step IV: SIPO will send out a letter of acceptance (if application is accepted) or rejection (if application is rejected) within one month to the applicant.

    Foreigners not operating a business in China are also allowed to apply for a patent, however, they need to make the application through an intermediary. The Patent application requirement is quoted as below:

    “Pursuant to Article 19 of the Chinese Patent Law, any foreigner, foreign enterprise or other foreign organization having no habitual residence or business office in China applies for a patent, or has other patent matters to attend to, in China, it or he shall appoint a patent agency designated by the Patent Administration Department Under the State Council to act as his or its agent.” (SIPO)

    Definition of Inventions, Utility Models and Designs

    Patent for Inventions

    The Chinese Patent Law specifies that “inventions” are new technical solutions to a product, a process or the improvement of the product or process. Product invention and process invention (can be further classified into production process and operation process) are two major types of invention. Product invention includes all articles created by human beings and process invention includes all processes invented or created by making use of the laws of nature. Novelty, creativeness and utility must be the elements exhibited by an invention intended to be granted a patent. The meanings of these elements are as follows:

    Novelty: no similar invention or utility model has been published in publications whether in or outside of China or openly used or made known to the public in other ways in China prior to the date of application for the patent, and no other party has applied for a patent for the same invention or utility model and recorded the same in patent application documents published after the application date.

    Creativeness: the invention in question has outstanding substantive features and significant improvement and the utility model in question has substantive features and improvement when compared with technologies existing prior to the application date.

    Utility: the invention can be produced or used and can bring about positive effects.

    Patent for Utility Models

    A utility model is a new technical solution for the shape or structure of a product, or the combination of the two. The shape of a product refers to the specific externally observable space-shape possessed by the product. The technical solutions for a product’s shape can be in three- or two-dimensional form. The structure of a product concerns how the product’s components are configured, organized and inter-related. The structure can be classified into mechanical structure and circuit structure. Mechanical structure means the connection, essential mechanical coordination and relative position of the product’s components. Circuit structure means the actual connection of the elements of which the product is composed.

    Patent for Designs

    Shape, pattern, color or combination of one or more of these, are protected elements of a design patent. As a result, there is a broad range of works that can obtain a design patent. Novelty is a prerequisite for a design to obtain a design patent. In design patents, ‘novelty’ means with comparison to an existing design or a combination of the features of an existing design known to the public whether in or outside China prior to the application date. The design in question should be substantially different and not conflict with any prior lawful rights,  therefore, it is recommended that owners should not publicly disclose their products designs or launch their product into the market before applying for a patent right. Nevertheless, a design will not lose its novelty in the following two circumstances. 1) A design is first disclosed at a Chinese government organized or recognized international exhibition. 2) Any party discloses the design without the consent of the applicant (provided that the design owner applies for a registration of the design to the patent administration department of China)

    Patent Rights Cases between China and Rest of the World

    The Paris Convention for the Protection of Industrial Property (“Paris Convention”), signed in 1883 in Paris, is one of the earliest intellectual property treaties. As of 2013, including China, the Convention has 174 contracting member countries all over the world and it is the world’s most widely adopted intellectual property treaty. Under this convention, an enterprise can first make an application for invention, utility model or design patent in any one of the contracting member countries of the convention and then apply for the same patent in other member countries within the following 12 months with the right of priority.

    Case 1 of Patent Protection in China - Bridgestone

    Bridgestone Corporation, a world famous tyre manufacturer, filed a lawsuit against China’s Qingdao Genco Industrial Group Co. for infringing a tire design patent of Bridgestone. Bridgestone claimed that the Qingdao Genco Industrial Group Co. copied a patented groove design on some of Bridgestone’s medium truck tires, which could be found in a Genco catalog. The case was decided in Qingdao City Intermediate People’s Court in early 2013. Bridgestone Corp. won the lawsuit and Qingdao Genco does not plan to make an appeal.

    Case 2 of Patent Protection in China - Kohler

    Kohler, a famous US-based manufacturer of kitchen and washroom facilities, had applied for a patent of its design of a “Pipe handle” in China in 1996 and obtained the patent in 1999. In 2004, Kohler discovered that two products from Shanghai Defu and Zhejiang Haixin Hardware Company Limited had infringed the Kohler design patent and filed a lawsuit against them. The Shanghai No.2 Intermediate People’s Court adjudicated that Kohler won the lawsuit over two local companies. Shanghai Defu must stop selling and Zhejiang Haixin must stop selling and manufacturing the infringing products. Kohler was also awarded damages of RMB 150,000 for economic loss.

    The Role of Business Valuation in Intellectual Property Disputes

    It is expected that more and more intellectual property legal disputes, concerning copyright, patents and trademarks, will occur in different countries. This is because the majority of our commercial products and services are related to intellectual property. The intellectual property right owner will defend from any infringement or breach in order to protect their intangible assets which account for a significant proportion of the business value. Intellectual property legal disputes between large corporations are not uncommon; a typical example is Apple’s   lawsuit against Samsung for infringing its smartphone design. However, the value of intellectual property usually involves a more sophisticated valuation procedure, compared to more tangible assets, because it will introduce some abstract market concepts and assumptions. Therefore, professionals in valuation with industrial knowledge of intellectual property have become crucial  in assisting claimants to make more informed  compensation value  decisions in legal disputes, e.g  how much should the defendant pay to a claimant in a trademark or patent infringement lawsuit.

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