Introduction

In Omega SA v New Bowling Watch Co Ltd [2022] HKCFI 3145; [2022] HKEC 4276, the defendant was found to have used the plaintiffs' promotional and marketing materials specifically and exclusively provided to and used by their authorised dealers in selling its products and liable for the tort of passing-off.

Background

Omega S.A., Compagnie Des Montres Longines, Francillon S.A. and Tissot S.A. (“Plaintiffs”) are wholly-owned subsidiaries of The Swatch Group Limited. The Plaintiffs’ products had been distributed to only designated boutiques and authorised dealers for their resale to retail customers.

New Bowling Watch Company Limited (“Defendant”) was once an authorised dealer of the  Plaintiff’s products about 20 years ago whose dealership had been terminated around 10 years ago. In 2017, the Defendant was found to have used the Plaintiffs’ promotional and marketing materials in selling its products. The Plaintiffs claimed that, in doing so, the Defendant passed off itself as the Plaintiffs’ authorised dealer.

The law on passing-off

Passing-off is a common law tort whereby someone deliberately or unintentionally passes off their goods or services as those belonging to another party. To establish the right of action, a plaintiff must show three elements sometimes referred to as the ‘classic trinity’ first enunciated in the English case of  Reckitt & Colman Products Ltd. v Borden Inc. [1990] 1 WLR 491, (also known as the “Jif Lemon Case”):-

1.       The goods or services have acquired goodwill or reputation in the marketplace that distinguishes such goods or services from competitors;

 

2.       The defendant misrepresents his goods or services, either intentionally or unintentionally, so that the public may have the impression that the offered goods or services are those of the claimant; and

 

3.       The plaintiff may suffer damages because of the misrepresentation.

Decisions

Goodwill

Firstly, on the point of “goodwill”, the court accepted that the Plaintiffs enjoy substantial goodwill in Hong Kong in respect of their registered marks.

Misrepresentation

Secondly, the court took the view that the use of such specific promotional and marketing materials by the Defendant on the display windows and counters, and the Defendant’s purported ability to issue warranty card to the purchaser, plainly conveyed a false message to the general public that the Defendant was an authorised licensee of the Plaintiffs.

The court went further to explain that although it might be the case that the products sold or offered to be sold by the Defendant were genuine products of the Plaintiffs, the Defendant’s conduct may still amount to passing-off. In essence, it is passing-off to represent oneself as an agent of the plaintiff, in either the legal or popular sense, or as an authorised dealer in the plaintiff’s goods. The court also noted that misrepresentation may be implicit merely in selling the plaintiff’s goods without a disclaimer.    

The court reiterated that the law of passing-off overs the scenario where one misrepresents to be the authorized dealer of another. In Music Fidelity Ltd v Vickers [2002] EWHC 1000, the defendant who was once the authorised distributors of the claimant, made a continuing representation statement on its website despite termination of its dealership. Similarly, in Sony v Saray Electronics Ltd [1983] FSR 302, the defendant who were not authorised dealers of the claimant, sold the claimant’s goods and purported to give the claimant’s guarantees to customers.

Damages

Lastly, the court agreed that the Plaintiffs would clearly suffer damage arising out of the Defendant’s misrepresentation. As such, the court took the view that the relevant public not being aware of this would be misled, and if they found out the invalidity of the warranty, they might blame the brands for the lack of warranty or control over the sales.

Having considered the evidence, the court found in favour of the Plaintiffs and held that the Defendant has passed off, or at least attempted to pass off, itself as an authorised dealer of the Plaintiffs.

Key takeaways

It should be noted that passing-off can be established even though most people are not deceived - the courts look at the evidence of misrepresentation, such as the size and nature of the applicable market to assess whether it is likely that enough individuals have made or will make the false assumption such as to cause damage to the goodwill of the claimant. It should also be reminded that the act of misrepresentation does not need to be intentional because passing off is a tort that attracts strict liability, meaning that intention is irrelevant, the conduct alone is enough.

 

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Important: The law and procedure on this subject are very specialised 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.

Published by ONC Lawyers © 2022