Introduction

It is not uncommon to see a company advertises its business by comparing its products/services with those of its competitors (“Comparative Advertising”). In fact, the use of a registered trademark belonging to others in one’s advertising may not necessarily constitute any trademark infringement if section 21 of the Trade Marks Ordinance (“Section 21”) is satisfied. The Court of First Instance provided the public with useful guidance on the interpretation of Section 21 in its ruling in Pccw-Hkt Datacom Services Ltd and Another v. Hong Kong Broadband Network Ltd [2018] 4 HKLRD 575 (“PCCW v Hong Kong Broadband”).

Case facts

The Plaintiffs hold interests in telecommunications, media, IT solutions in Hong Kong and they are the registered proprietors of the trade marks “HKT”, “eye”, “PCCW” and “電訊盈科” (“Marks”), which are registered for a number of telecommunication and internet services provided by the Plaintiffs (the “Plaintiffs’ Services”). The Defendant, a competitor of the Plaintiff, carries on business in the provision of telephone and internet services in Hong Kong.

During February to April 2015, the Defendant published advertisements using signs identical to the Marks. The advertisements in question (“Advertisements”) have straplines or catchphrases which read:

1.        HKT家居電話用戶 轉軚是時候

2.        PCCW Home Telephone Service customers say goodbye to bloated monthly fees!

3.        PCCW Home Telephone and eye Communications Service customers Say goodbye to bloated monthly fees

4.        電訊盈科家居電話及eye用戶 唔駛再忍受咁大食嘅家居電話用費

5.        電訊盈科家居電話用戶唔駛再忍受咁大食嘅家居電話用費 

It was undisputed that the Defendant had used the Marks in its Advertisements. The Plaintiff claimed infringement of its Marks under section 18(1) and section 18(4) of the Trade Marks Ordinance. The Defendant invoked Section 21 which provides, inter alia, as follows:

1.        Nothing in section 18 (infringement of registered trade mark) shall be construed as preventing the use by any person of a registered trade mark for the purpose of identifying goods or services as those of the owner of the registered trade mark or a licensee, but any such use which is otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark.

2.        In determining for the purposes of subsection (1) whether the use is in accordance with honest practices in industrial or commercial matters, the court may consider such factors as it considers relevant including, in particular, whether—

a.        the use takes unfair advantage of the trade mark;

b.        the use is detrimental to the distinctive character or repute of the trade mark; or

c.         the use is such as to deceive the public.

The Plaintiffs argued that the Defendant’s use of the Marks in the Advertisements took unfair advantage of and/or was detrimental to the repute of the Marks because it promoted the Defendant’s own services, conveyed a message that the consumers get a better deal from the Defendant and the capacity of the Marks to stimulate the public’s desire to subscribe to the Plaintiffs’ Services were impaired. The Plaintiff further claims that the use of the Marks conveyed the erroneous impression to the public that the prices for the Plaintiffs’ Services are unduly excessive. Therefore, the Defendant’s use of the Marks were not in accordance with honest practices in industrial or commercial matters.

The Defendant contended that the tenor of the Advertisements was that the Defendant’s Services were less expensive as compared to those of the Plaintiffs. A reasonable reader of the Advertisements who was aware of the full facts was likely to take the view that the Advertisements were in fact honest and the representations in the Advertisements were true and not misleading. By using the Marks to identify the Plaintiff’s Services and stating the truth in a fair comparison as to the pricing offered, the Defendant submitted that it did not take unfair advantage of the Plaintiffs’ Marks or discredit the Marks.

The law

The Defendant made reference to English authorities on the English equivalent of Section 21, and the English court explained that the primary purpose of their equivalent of Section 21 is to permit comparative advertising and there is no trademark infringement unless the use of the trademark is not in accordance with honest practice. An objective test should be applied, and the question is whether a reasonable reader, upon being given the full facts, would be likely to say that the advertisement is not honest. It should be borne in mind that average customers are used to puffery advertisements, so if an average customer considers that the advertisement is sufficiently true in substance then there is no reasonable likelihood of the public being misled and the requirement of honest use of the trademark would be satisfied accordingly.

The Plaintiff argued that the English authorities relied on by the Defendant should not be followed as they failed to take into account the trademark directives of the European Union (the “Directives”). Other English authorities and decision which did take into account the Directives, have established that the concept of “honest practice” constitutes a duty to act fairly in relation to the legitimate interest of the trademark proprietor. In short, counsel for the Plaintiff contended that under the Directives, proper regard must equally be given to whether “the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark”.

The Court held that the Hong Kong courts are not bound by the Directives or the English decisions. Although they are relevant and helpful to the Court’s analysis of Section 21, they include requirements and conditions that are not specified under our own Section 21. The Court should therefore not be introducing and enforcing the Directives through the back door, by interpreting our own Section 21 based on the Directives. However, the Court accepted the Plaintiff’s submission that the legitimate interests of the trademark proprietor have to be considered. In this regard, the Court reminded that, in comparative advertising, it is expected that the defendant advertiser will not present the claimant’s goods in a particularly favourable way, so the claimant’s goods are bound to be undermined even under an objective assessment. In other words, merely making fun of competitor’s goods or services does not necessarily amount to trademark infringement.

Outcome of the case

The Court was of the view that the Hong Kong public was more than used to hyperbole and exaggeration, and the words employed by the Defendant meant no more than ‘expensive’, albeit expressed in a sensational way and that was usual in advertising. Further, evidence showed that the price of the Plaintiff’s services were in fact more expensive than that of the Defendant’s. The statements made by the Defendant in their advertisement were not substantially misleading and they were not made in a dishonest way to deceive the public. Even if it could be said that the Defendant took advantage of the Plaintiff by riding on their reputation, the advantage was not an unfair one as the message conveyed in the advertisement was substantially true.

Conclusion

The gist of the case is that comparative advertising is permitted under Section 21, and there is no trade mark infringement unless use of the trade mark is not in accordance with honest practices. The courts will apply an objective test to determine whether such use is honest, and whether it is protected under Section 21. The purpose of comparative advertising is to draw distinctions and point out differences between competitors – an average reader would not expect an advertisement to point out the advantages of the competitor’s goods or service and would not be misled by puffery advertisements. In other words, using other’s trademarks in advertising and making fun of their products or services does not necessarily lead to a conclusion of trademark infringement as long as the public is not misled.