HCA739/2010
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 739 OF 2010
--------------------------
BETWEEN
APPLE INC. 1st Plaintiff
IP APPLICATION DEVELOPMENT LIMITED 2nd Plaintiff
and
PROVIEW INTERNATIONAL HOLDINGS LIMITED 1st Defendant
(唯冠国际控股有限公司)
PROVIEW ELECTRONICS CO. LTD 2nd Defendant
(唯冠电子股份有限公司)
PROVIEW TECHNOLOGY (SHENZHEN) CO., LTD 3rd Defendant
(唯冠科技(深圳)有限公司)
YANG LONG-SAN, ROWELL(楊榮山) 4th Defendant
YOKE TECHNOLOGY (SHENZHEN) CO. LTD 5th Defendant
(唯冠光电照明(深圳)有限公司)
--------------------------
Before : Hon Poon J in Chambers
Date of Hearing : 28 June 2011
Date of Decision: 28 June 2011
Date of Reasons for Decision : 14 July 2011
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REASONS FOR DECISION
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This is an application for interlocutory injunctions, which I allowed on 28 June
2011. These are the reasons for my decision.
1.
The background leading to these proceedings may be summarized as follows.2.
A. BACKGROUND
A.1. The parties
Apple, a US company established in January 1977, is a world renowned leader in
the business of designing, manufacturing and marketing of a wide variety of innovative
products including computers, iPod media players, iPhones and iPads. IP Application, an
English company incorporated in August 2009, is a special purpose company set up and
used by Apple to acquire trademarks related to the name “iPad”. They are the
plaintiffs in these proceedings.
3.
The defendants come from the Proview Group. The Proview Group is a
producer of display devices. Its major products include LCD monitors, CRT monitors
and flat-panel digital products. It has operations and offices around the world, including
Taiwan, Mainland China (Shenzhen and Wuhan), Hong Kong and Europe. Its holding
company is Proview Holdings, which was incorporated in Bermuda and is listed on the
Hong Kong Stock Exchange.
4.
Yang Long San, Rowell (“Yang”), a Taiwanese, is the founder of the Proview
Group. He was at all material times the chairman and chief executive officer of Proview
Holdings until he was adjudicated bankrupt on 2 August 2010. Other companies of the
Proview Group that feature in these proceedings are Proview Electronics, a Taiwan
company, Proview Shenzhen and Yoke Technology, both being Shenzhen companies.
Yang was at all material times the responsible person and director of Proview
Electronics. He was also the legal representative, general manager and chairman of both
Proview Shenzhen and Yoke Technology and remains so despite his bankruptcy.
5.
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A.2. The disputes
In January 2010, Apple announced its new tablet computer branded “iPad”. It
was first launched on the US market on 3 April 2010 and then in other places around the
world one month later. It has since become much sought after worldwide. As at
June 2010, over 1 million units had already been sold in the US market alone. Its success
is phenomenal.
6.
In preparation for the launch of iPads, Apple caused investigations to be
conducted throughout the world to identify registered trademarks associated with the
name “iPad” with a view to acquiring them. As Mr Paul Schmidt of Messrs Baker &
Mackenzie (“B&M”), solicitors for Apple and IP Application explained in his second
affidavit :
7.
“17. … Apple’s products are highly sought after by consumers throughout the world and
the launch of every new product by Apple is eagerly awaited and the subject of much media
coverage. Accordingly, in the lead up to the launch of a new product, Apple faces the dual
challenges of maintaining the confidentiality of the product (including its features and the
name or trade mark under which it will be marketed) and ensuring that upon its launch, the
product can be marketed under the name or trade mark selected for it. The latter challenge is
met, inter alia, by Apple securing all requisite trade mark registrations worldwide prior to the
announcement and launch of the new product. However, in order to maintain confidentiality
and the anonymity of Apple, this is done through special purpose companies incorporated for
the purpose for securing such requisite trade mark registrations. Based on my 16 years’
experience as a lawyer, and in particular, 7 years of experience as a trade marks lawyer, it is
my experience that this practice of using special purpose vehicles to secure trade mark
registrations in order to preserve the anonymity of a well known company and the
confidentiality of its plans to launch a new product is a common practice throughout the
world, and especially in mainland China.
18. Accordingly, in 2009, Apple carried out investigations into the use of trade marks
associated with the name ‘iPad’ via its lawyers and agents… in preparation for the
proposed announcement and launch of its iPad branded device in early 2010.”
The investigations revealed that Proview Group owned trademark registrations
in eight countries or territories (“the Subject Trademarks”) including two trademark
registrations in the Mainland, Registrations Nos. 1590557 and 1682310 (“the China
Trademarks”). Negotiations between an agent engaged by Apple and IP Application
and Proview Group’s representatives then took place between August and
December 2009. Eventually, IP Application and Proview Holdings, Proview Electronics
and Proview Shenzhen (“the Contracting Defendants”) entered into a written
agreement in December 2009 whereby the Contracting Defendants agreed to sell, transfer
and assign the Subject Trademarks to IP Application for £35,000 (“the Agreement”).
8.
It is Apple and IP Application’s case that in the process of drawing up the9.
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formal written agreement (“the Written Agreement”) and the assignments (“the
Country Assignments”) to give effect to the Agreement, the representatives of the
Contracting Defendants represented and led IP Application to believe that all the Subject
Trademarks, including in particular the China Trademarks, were owned by and registered
in the name of Proview Electronics. Accordingly, the Written Agreement and the
Country Assignments executed on 23 December 2009 expressly stated that Proview
Electronics was the proprietor of the Subject Trademarks including the China Trademarks
and that Proview Electronics warranted that it was the unencumbered sole owner of the
Subject Trademarks including the China Trademarks. The Country Assignment
pertaining to the China Trademarks (“the China Country Assignment”) also recited
that Proview Electronics was the proprietor of the China Trademarks. However, after
Apple had announced the launch of iPads in January 2010, it was discovered that the
China Trademarks were in fact registered in the name of Proview Shenzhen. The China
Country Assignment was accordingly ineffective in assigning the China Trademarks to
IP Application.
Apple and IP Application further complained that while acknowledging that a
mistake had been made in the China Country Assignment, the Contracting Defendants
refused to rectify the mistake and suggested that Apple should pay US$10 million to
purchase the China Trademarks.
10.
On 24 March 2010, Apple and IP Application, through B&M, issued a letter to
the Contracting Defendants demanding them to transfer the China Trademarks to them.
The Contracting Defendants refused to do so.
11.
B. APPLICATIONS FOR INTERIM INJUNCTIVE RELIEF
B.1. Events leading to the applications
Since early April 2010, there had been intermittent reports in the media
suggesting that the Proview Group, in particular Proview Holdings and Proview
Shenzhen were about to sell or dispose of the China Trademarks. When pressed by
B&M, Proview Holdings and Proview Shenzhen gave an undertaking on 9 April 2010 not
to sell the China Trademarks before 30 April 2010. On 29 April 2010, Proview
Shenzhen, through its solicitors, gave a further undertaking not to sell or otherwise
dispose of the China Trademarks until 31 May 2010 in order to facilitate further
discussions for a commercial resolution of the dispute.
12.
Despite the second undertaking, press reports about the possibility of Proview
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Despite the second undertaking, press reports about the possibility of Proview
Holdings and Proview Shenzhen selling the China Trademarks continued to surface. In
response to B&M’s demands, Proview Shenzhen, through its solicitors, reiterated on
12 May 2010 that it had no intention of selling or otherwise disposing the China
Trademarks until 31 May 2010.
13.
In the meantime, the fact that the Proview Group was in financial difficulties
began to emerge. In fact, on 12 May 2010, the Hong Kong Stock Exchange issued a
notice that trading of Proview Holdings’ shares had been suspended. Legal proceedings
had been instituted against Proview Holdings, Proview Shenzhen and Yang in the
Mainland seeking recovery of substantial assets. More pertinently, B&M found out that
China Minsheng Banking Corporation had obtained an asset preservation order
(“APO”) against Proview Shenzhen and that such asset preservation order had since
March 2010 been registered with the Mainland Trade Mark Office (“TMO”) over the
China Trademarks.
14.
Apple and IP Application immediately commenced the present action on 20 May
2010.
15.
On 24 May 2010, they instituted proceedings against Proview Shenzhen in the
Shenzhen Intermediate People’s Court and filed an application for APO in respect of the
China Trademarks. The application was granted on 12 June 2010 but subject to the APOs
obtained by some other Mainland banks.
16.
Further searches revealed that contrary to its undertakings, Proview Shenzhen
had in fact lodged applications with the TMO to transfer the China Trademarks to Yoke
Technology on 7 May 2010.
17.
B.2. Applications
On 2 June 2010, Apple and IP Application applied, ex parte, for interim
injunctive relief against Proview Holdings, Proview Shenzhen, Yang and Yoke
Technology essentially to preserve the China Trademarks. Deputy Judge Carlson allowed
the application.
18.
On 3 June 2010, Apple and IP Application took out the present inter parte
summons (“the Summons”), which was returned for the first hearing before Sakhrani J
on 11 June 2010.
19.
Proview Shenzhen and Yoke Technology were then absent. Sakhrani J granted
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Proview Shenzhen and Yoke Technology were then absent. Sakhrani J granted
the interim relief sought against them until trial or further order.
20.
Proview Holdings and Yang were legally represented. After hearing arguments,
Sakhrani J ordered that until the determination of the Summons, Proview Holdings be
restrained from dealing in or with the China Trademarks and Yang be restrained from
procuring, assisting or authorizing Proview Holdings, Proview Shenzhen and/or Yoke
Technology to deal in the China Trademarks. His Lordship then gave directions for filing
of evidence and adjourned the Summons for substantive hearing.
21.
C. THE PRESENT HEARING
The substantive hearing then came before me.22.
Yang purported to file an affirmation for and on behalf of himself and Proview
Holdings on 30 July 2010. That affirmation was affirmed outside Hong Kong before a
solicitor of Hong Kong. It is clearly inadmissible : see Top Flying Investment Ltd v Open
Mission Assets Ltd [2006] 4 HKLRD 83, per Recorder McCoy, SC at paragraphs 30–
32. B&M pointed out the deficiency to Yang’s solicitors but no attempt had been made
to rectify the defect. Effectively, neither Proview Holdings nor Yang has placed any
evidence before me.
23.
As noted, Yang was adjudicated bankrupt on 2 August 2010. Apple and
IP Application had obtained leave to proceed against him on 10 November 2010.
24.
By letter dated 20 June 2011, Proview Holdings, through its solicitors, indicated
that it would not object to the orders sought against it insofar as they relate to it.
25.
What remains for my determination is the outstanding application against Yang.
He is now acting in person. He did not appear at the hearing.
26.
D. DISCUSSION
D.1. The applicable principles
They have become well established since American Cyanamid Co. v Ethicon Ltd
[1975] AC 396. In brief, the plaintiff must show that :
27.
(1) there is a serious question to be tried in respect of the claim;
(2) the plaintiff will suffer irreparable damage if no injunction is granted;
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(3) the defendant will not suffer irreparable damage if the injunction is granted;
and
(4) if (b) and (c) are not conclusive, on a proper consideration of the balance of
convenience or balance of justice, an injunction shall be granted.
These requirements are discussed in turn below.
D.2. A serious question to be tried
The causes of action that Apple and IP Application rely on are as follows.28.
D.2.a. Breach of the Agreement by the Contracting Defendants
There is clearly a serious question to be tried that the Contracting Defendants
have acted in breach of the Agreement in that they had wrongfully refused to honour their
obligation to assign the China Trademarks to IP Application.
29.
D.2.b. Unlawful means conspiracy
In a claim of conspiracy, the plaintiff must prove the following elements :30.
(1) a combination or agreement between two or more individuals;
(2) an intent to injure;
(3) pursuant to which combination or agreement and with that intention certain
acts were carried out;
(4) resulting in loss and damage to the plaintiff.
See Bullen & Leake & Jacob’s Precedents of Pleadings 15th Edn, Vol. 2, at
paragraph 50–01.1.
A combination to effect a breach of contract is an actionable conspiracy. A party
to the conspiracy can liable even if he is not a party to the contract and even where it was
not possible to establish that he had procured any breach of it, but where he had merely
combined, with a common design, together with the parties committing the breach. See
Clerk & Lindsell on Torts 20th Edn, at paragraph 24–103.
31.
A company, being a separate legal person, can conspire with its directors; and
the knowledge of the company may be found in a director who has management or
control for the transaction or act in question. SeeClerk & Lindsell on Torts 20th Edn, at
32.
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paragraph 24–93; Belmont Finance Corporation v Williams Furniture Ltd and others
(No. 2) [1980] 1 All ER 393.
Here, the conduct of all the defendants demonstrate that they have combined
together with the common intention of injuring Apple and IP Application by acting in
breach of the Agreement. Proview Holdings, Proview Electronics and Proview
Shenzhen, all clearly under Yang’s control, have refused to take any steps to ensure
compliance with the Agreement so that the China Trademarks are properly assigned or
transferred to IP Application. Instead, they attempted to exploit the situation as a business
opportunity for the Proview Group by seeking an amount of US$10,000,000 from Apple.
33.
Yoke Technology inferentially participated in the conspiracy by acting as the
transferee of the China Trademarks under the reported transfer applications referred to in
paragraph 17 above.
34.
Yang’s participation in the conspiracy can be inferred from among other
things, the following matters :
35.
(1) as the chairman and chief executive officer of Proview Holdings and the
responsible person and director of Proview Electronics and as the legal
representative, general manager and chairman of both Proview Shenzhen and
Yoke Technology, he had at the material time management and control over
them; and
(2) he had knowledge of the Agreement entered into by the parties in December
2009.
It is plain that the defendants had the necessary intent to injure Apple and
IP Application and their conduct will cause damage to them.
36.
Accordingly, I am satisfied that there is clearly a serious question to be tried for
the claim of conspiracy.
37.
D.2.c. The China Trademarks held on trust
A contract for valuable consideration to transfer a subject matter passes a
beneficial interest by way of property in that subject matter if the contract is one of which
a court of equity will decree specific performance and the vendor becomes in equity a
trustee for the purchaser of the subject matter. See Palmer v Carey [1926] AC 703, at
38.
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pp.706–707; Lewin on Trusts 18th Edn, at paragraphs 10–03 to 10–10.
In performing of the Agreement, IP Application had paid £35,000 for the Subject
Trade Marks (including the China Trademarks) on 23 December 2009. It is plainly
arguable that the circumstances of the present case are such that the court may order
specific performance if IP Application succeeds in its claim for breach of contract. There
is accordingly clearly a serious question to be tried that Proview Shenzhen now holds the
China Trademarks on trust for Apple and IP Application.
39.
D.2.d. Breach of trust and dishonest assistance
The general requirements of liability for dishonest assistance are that :40.
(a) there exists a trust;
(b) to which there is a breach of trust by the trustee of that trust;
(c) that the defendant induces or assists that breach of trust; and
(d) the defendant does so dishonestly.
See Lewin on Trusts, 18th Edn, at paragraphs 40–09, 40–14, 40–15, 40–17
to 40–19, 40–21 to 40–23; Royal Brunei Airlines SDN. BHD. v Philip Tan
Kok Ming [1995] 2 AC 378, at pp.384D–385D, 386G–391D, 392F–H.
There is clearly a serious question to be tried that each of these requirements are
made out in the present case :
41.
(a) there exists a trust by reason of the matters set out in Part D.2.c above;
(b) Proview Shenzhen has acted in breach of trust by reason of its refusal to
transfer and assign the China Trademarks;
(c) other defendants have induced and/or assisted in Proview Shenzhen’s
breach; and
(d) such inducement and/or assistance is dishonest.
D.3. Irreparable damage to Apple and IP Application
Apple has launched and marketed its iPads worldwide, including, in particular,
in Mainland China. It is accordingly important that it is able to secure and obtain the
42.
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China Trademarks. It can do so only if the China Trademarks are not disposed of by the
defendants pending the determination of the present case. If the defendants are not
r
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