Tsit Wing vs. TWG Tea (Part III): "Dilution" in Passing-Off vs. "Essential Feature" in Trade Mark Infringement

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Introduction
In TWG vs. TWG: Case Study on Rights in a Mark under Trade Marks Ordinance and Common Law (Part I)  and (Part II), we discussed the success of Tsit Wing at the Court of First Instance in obtaining injunctive relief against TWG Tea for infringing Tsit Wing’s trademark rights and passing off their logo as Tsit Wing’s mark.

TWG Tea appealed to the Court of Appeal but the appeal was dismissed subject to modification of the terms of the injunction restraining trade mark infringement. TWG Tea subsequently obtained leave to appeal to the Court of Final Appeal (the “CFA”). The CFA handed down its judgment on 29 January 2016, which dismissed the appeal.

Mere Dilution Insufficient to Constitute Passing-Off
The CFA first discussed whether sufficient damage for passing-off was sustained by “mere potential dilution of a trade mark” (as opposed to actual confusion by consumers between the goods or services of the plaintiffs and those of the defendants). The term “dilution” was referred to in the trial judge’s Judgment. TWG Tea argued that the United States approach to “dilution” of trade marks does not represent the law of passing-off in Hong Kong. The CFA accepted this submission but considered that it could not assist TWG Tea’s case, because: (1) TWG Tea was not held liable on the ground of dilution without confusion and deception; (2) it is well established that the passing-off action protects goodwill against its threatened erosion by the activity of the defendant in cognate fields into which the plaintiff may wish to enter, where that activity causes or is likely to cause deception of those familiar with the mark or other indicia of the plaintiff; and (3) TWG Tea was found at trial to engage in the kind of activity referred to in (2).

Trade Mark Infringement
TWG Tea also challenged that the Court of Appeal, as had the trial judge, erred in law in its construction and application of section 18(3) of the Trade Marks Ordinance (Cap. 559) (the “TMO”). Section 18(3) of the TMO states that:

 “A person infringes a registered trade mark if (a) he uses in the course of trade or business a sign which is similar to the trade mark in relation to goods or services which are identical or similar to those for which it is registered; and (b) the use of the sign in relation to those goods or services is likely to cause confusion on the part of the public.”

Dissimilarity of marks not at issue
TWG Tea argued that the Court of Appeal failed to follow the requisite “step by step” approach in considering the application of the components of section 18(3) of the TMO, namely “similarity” followed by “likelihood of confusion”. However, the CFA rejected this submission.  TWG Tea was observed not to have contended at trial, that the marks are dissimilar under section 18(3)(a), such that it is unnecessary to consider likelihood of confusion under section 18(3)(b).  Instead, TWG Tea’s case was that the level of similarity, coupled with the context of use, was that there was no likelihood of confusion.

“Essential” or “dominant” features against context
TWG Tea also submitted that the Court of Appeal misunderstood that it is sufficient for similarity of marks under section 18(3) of the TMO to be established where the defendant uses in connection with its goods the “essential” or “dominating” feature of the registered mark. In particular, the Court of Appeal (a) discounted the significance in assessing the colour element and features other than the letters TWG, and (b) discounted the visual elements in the defendants’ Cartouche signs and Balloon signs.

The CFA rejected this argument, because when applying section 18(3), it cannot be erroneous in assessing “similarity” to consider if there be any striking features of the mark or sign which appear “essential” or “dominant”, but doing so without disregarding the entirety of the mark or sign or stripping it of its context, including evidence of what happens in the particular trade. The Balloon signs had never been used on its own, so an average customer was only taught to place great significance on the “TWG” instead of the Balloon signs. On the other hand, the coloured versions of Tsit Wing’s registered marks were registered together with corresponding monochrome versions as a series of trade marks. This indicated that the presence of colours in Tsit Wing’s registered marks should be regarded as a matter of non-distinctive character which did not substantially affect the identity of the trade mark.

Visual comparison already made
TWG Tea further argued that the Court of Appeal placed too much emphasis upon aural rather than visual comparison between Tsit Wing’s registered marks on the one hand and the Cartouche signs and the Balloon signs on the other. However, the CFA refuted this submission because the Court of Appeal in its Judgment had already pointed out the considerable similarity with Tsit Wing’s registered marks even on a visual level by the letters “TWG” in the overall decor and packaging of the salon and products.

In conclusion, the CFA held that the trial judge and the Court of Appeal did not make any error of law in their approaches to determine questions of similarity and likelihood of confusion. The appeal was dismissed.

Conclusion
The CFA Judgment authoritatively upheld the traditional English common law position on passing-off and trade mark infringement actions.

On passing-off, the Judgment confirmed that the foreign concepts of “dilution” and “unfair competition” are irrelevant. On trade mark infringement, it implied that the higher court is unlikely to interfere with the lower court’s findings on the questions of similarity and likelihood of confusion, if the latter has considered: (1) striking features of the mark or sign which appear “essential” or “dominant”, and (2) the entirety of the mark or sign, without stripping the mark or sign of its context.

 
IMPORTANT:
The law and procedure on this subject are very specialized and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.
 
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Published by ONC Lawyers © 2016