Introduction

Where an applicant’s mark was an unregistered trade mark protected by the law of passing-off or a well-known trade mark, which had existed prior to the application of an identical or similar registered trade mark, subject to a defence of honest concurrent use, the registered trade mark may be invalidated and no longer pose as a barrier to the registration of the applicant’s mark. The Court of Appeal illustrated this point in the recent case of Lin Heung Tea House & Bakery (a firm) v Guangzhou Catering Services Enterprises Group Company Limited), CACV 196/2013 (the “Lin Heung case”).

Facts

The Applicants (“Lin Heung”) run a famous restaurant serving traditional Cantonese cuisine, which have been in business in Hong Kong since 1926. The restaurant had its origin in Guangzhou as Guangzhou Lianxiang (“GZ Lianxiang”). GZ Lianxiang was subsequently nationalised in 1957 and since then, Lin Heung has had no connection or relations with GZ Lianxiang.

Both parties were in the business of distributing mooncakes and other kinds of cakes and pastries in Hong Kong. Lin Heung advertised their mooncakes by outdoor advertisements and circulars to the public under the mark and device of “蓮香月餅” (Lin Heung Mooncake); the same Chinese characters are also embossed on the face of each moon cake.  This has been the practice for the last 80 years.  Lin Heung also export mooncakes to their distributors in the USA and Canada and for that reason have registered the mark and device “蓮香月餅” (Lin Heung Mooncake) there in the 1990s.

In 2006, Lin Heung’s application for the marks “” and “” were rejected by the Registrar of Trade Marks because of the mark “” (the “Suit Mark”) registered under the name of GZ Lianxiang. Lin Heung therefore commenced action seeking a declaration that the Suit Mark is invalid and also its revocation.

Legal Analysis

Honest Concurrent Use

In view that Lin Heung’s prima facie case would be established, GZ Lianxiang defended the action by claiming honest concurrent use, and that the Registrar should exercise his discretion to maintain the registration even though it is likely to cause public confusion.

GZ Lianxiang mooncakes had been sold in Hong Kong under the Suit Mark since 1984.  Prior to the date of application for the registration of the Suit Mark in 2006, there had been 12 years’ use which was found to be a sufficiently lengthy period of concurrent use, as 5 years is generally sufficient. The historical background in particular GZ Lianxiang was clearly the originator and earlier user of the Suit Mark and Lin Heung were only subsequently set up by a group of shareholders of GZ Lianxiang supported a finding of honesty of the concurrent use.

The Court was satisfied that GZ Lianxiang had the requisite knowledge as it used its trade mark with other descriptions, such as the geographical location “Guangzhou” to avoid confusion and distinguish its mooncakes from those of Lin Heung. Nevertheless, the Court held that knowledge of an earlier mark or the likelihood of confusion may not necessarily render the use dishonest. The use of the trade mark in combination with other description to avoid confusion, which still involved the use of the mark, could not be regarded as dishonest.

Refusal to Exercise Discretion

Lin Heung had used the well-known trade mark “蓮香” (Lin Heung) in Hong Kong for over 80 years; whereas GZ Lianxiang only used the Suit Mark for a considerably shorter period of around 20 years before ceasing to use the same since 2007.  Between at least 1957 (if not earlier) and 1984 when GZ Lianxiang reappeared in the Hong Kong market, Lin Heung have built up its distinct territory-specific goodwill and reputation on the “蓮香” (Lin Heung) in the local market, and the “蓮香” (Lin Heung) products are associated with Lin Heung rather than a cake shop in Guangzhou despite the mark’s origin there.

In terms of quantity, GZ Lianxiang’s sales had dropped to less than HK$100,000 whereas Lin Heung’s annual sales figure was HK$3.6 million. Therefore, any relative inconvenient caused by the Court’s discretion being exercised against GZ Lianxiang would be minimal.

The Court held that the absence of evidence of actual confusion had very little or no weight since confusion had been avoided in the past due to GZ Lianxiang’s deliberate use of the Suit Mark in conjunction with other descriptors. However, such confusion would arise if GZ LIanxiang was permitted to use the Suit Mark simpliciter based on the present registration.

The Court was satisfied that there was little risk of any infringement proceedings against GZ Lianxiang provided that it had not exported mooncakes to Hong Kong since 2007. Therefore, no serious prejudice would be caused to GZ Lianxiang if it was required to change its packaging as a result of its suit mark being declared invalid.

In view of the factors above, the Court refused to exercise the discretion to maintain the registration of the Suit Mark based on honest concurrent use, and therefore dismissed the appeal.  The Suit Mark was invalidated.

Conclusion

The Lin Heung Case demonstrates how an unregistered trade mark owner may subsequently register its mark despite an existing identical or similar trade mark registration.  But as can be seen above, such would require heavy evidential proof of reputation.  It remains advisable for unregistered trade mark owners to apply for trade mark registrations early to dispense with the need to prove his case to invalidate or revoke the existing registration.

For the existing trade mark registrants, when your mark is known to be identical or similar to an earlier unregistered trade mark, it may not be prudent to rely on the defence of honest concurrent use.  Such registrants may need to negotiate with the unregistered trade mark owners to obtain the latter’s consent in using the registered trade mark.