Introduction
It is not unusual in Hong Kong to find companies registered in names which are confusingly similar to others. This is particularly true in Chinese context as traditionally we love to use auspicious characters in the company names, like “發” (wealthy), “龍” (dragon) or “運” (luck) etc. As a natural result of this, there are a large number of companies with confusingly similar names.

Regardless of the size of the business, a company may be concerned that their goodwill may be damaged by the existence of confusingly similar company names as the general public may not be able to differentiate between companies with similar names, in particular, those incorporated by bad faith traders with an intention to ride on the goodwill and reputation of others.

Remedy: Claim for Trademark Infringement and Passing-off
In our newsletter issued in April 2008 entitled “What To Do If Someone Incorporated a Company with a Name Confusingly Similar to Your Company?”, we have already discussed the problem of the increasing number of shadow companies incorporated in Hong Kong.  We pointed out that the Registrar of Companies is empowered to direct a name change within 12 months of incorporation of the shadow company. In that case, the aggrieved company can lodge a complaint with the Companies Registry against the shadow company.

If the shadow company has been incorporated for more than 12 months, a company can commence trade mark infringement and/or passing-off action against the companies with confusingly similar names for an injunction to restrain the latter from using the names. Upon being served with the injunction order, the Companies Registry would direct the shadow companies to change their names. If the latter fail to change their names in accordance with the direction, the Registry is empowered to replace the name of the shadow company with its company registration number. 

It is noteworthy that recently the Court of First Instance in the case of Power Dekor (Hong Kong) Ltd v Power Dekor Group Co Ltd (HCA 1139/2013) expressed particular concern regarding the use of shadow companies to confuse customers. Zervos J in giving his judgement opined that despite the fact that the problem of shadow companies has raised concern for some time, the Companies (Amendment) Ordinance 2010 only empowered the Registrar of Companies with the power to direct a shadow company to change its name pursuant to a court order and disallow companies to register with a name which is the same as a name in relation to which a direction has previously been issued.

These measures, according to Zervos J, “do not go far enough and serious consideration should be given to enacting provisions that give the Registrar of Companies, in the appropriate circumstances, far more effective measures, including the power not to register a company name or to deregister a company with a name that is the “same as or too like” another”.

After all, the problem of the large number of shadow companies, as spotted by Zervos J, stems from the fact that the Registrar of Companies will allow a name of a new company if it is not entirely identical with another existing registered company, despite the existence of very similar, yet not identical, company names.

Although Zervos J in his judgement directed that the judgement be referred to the Registrar of Companies, it is not certain whether the Registrar would step up to tackle the longstanding problem in view of policy and costs implications.

Prevention: Avoid incorporating
companies with names that are “too like”
As the new Companies Ordinance is going to take effect from 3 March 2014, the Companies Registry has just issued a new edition of the “Guideline on Registration of Company Names for Hong Kong Companies” (the “New Guideline”) in January 2014. Although it must be noted here that s.108 of the new Companies Ordinance is substantially a direct migration of s.22(2) of the existing Companies Ordinance (Cap.32), and nothing much has changed in this area of law.

Not surprisingly, the Companies Registry remains a passive role in the prevention of incorporation of shadow companies. The New Guideline reiterates the position that registration of a company name does not mean that the name is protected, neither does it mean that such a name is not liable to challenge by others, and also that “The registration of a company name with the Companies Registry does not confer any trademark rights or any other intellectual property rights in respect of the company name or any part thereof. Applicants should, therefore, ensure that they do not adopt a name which resembles a registered trademark or is “too like” the name of another company.”

The New Guideline also contained what criteria the Companies Registry would take into account in forming an opinion that two names are too like. The following examples are supplied by us for illustration:

1.         Names which are the same – for example, “KWUN TONG ENGINEERING LIMITED” would be considered “too like” “KWUN TONG ENGINEERING COMPANY LIMITED”, .
2.         Names which are phonetically identical – for example, “HING LUNG” is aurally similar to “HING NUNG”.
3.         Names in which the slight variation in spelling does not make a significant difference – for example, “KWUN TONG COLOUR LIMITED” and “KWUN TONG COLOR LIMITED”.
4.         Grammatical variations which do not have significant difference – for example, “ADVANCE” and “ADVANCED”.
5.         Names which contain the same distinctive element:-
a.         Where the names are sufficiently qualified – for example, between “ABC CLOTHING LIMITED” and “ABC FOOD LIMITED”
b.         Where the names are not sufficiently qualified – for example, “ABC CLOTHING LIMITED” and “ABC APPAREL LIMITED”. 

Despite the power given to the Registrar of Companies, currently it has not taken a proactive approach in exercising the power conferred to him to direct shadow companies to change their names pursuant to s.22(2) of the Companies Ordinance (or s.108 of the new Companies Ordinance upon it being effective in the near future). The task of clearing existing shadow companies is currently shared by the Companies Registry and the Court. If the Companies Registry is going to take up this task, it would not be an easy one, particularly in light of the large number of shadow companies already incorporated and existing on the register.

Conclusion
After all, whether two company names are “too like” is a question of judgement and very much has to be viewed case by case. While the Registrar of Companies might not take too active a role in clearing out existing shadow companies, those who seek to incorporate a new company are always advised to conduct a thorough search on the Companies Registry for similar names, lest they should infringe others’ intellectual property rights.  It is also crucial to obtain trade mark registration at the Trade Marks Registry to safeguard the companies’ intellectual property rights.

Published by ONC Lawyers © 2014