Introduction

Companies incorporated in Hong Kong with a name which is confusingly similar or identical to a well-known brand name or trade mark are what we called “Shadow Companies”, which are being used as a tool by some opportunists to carry out counterfeiting and other illegal activities in the Mainland China. Needless to say, the emergence of these shadow companies has long been a headache to many of the brand owners, as they substantially caused confusion to the market. 

In our previous newsletter “When the Name of Two Companies are “Too Like” – Quick Guide to Remedy and Prevention“ (February 2014 Issue), we have explored the protection and remedies against shadow companies available under the Hong Kong Companies Ordinance (Cap. 622) (“Companies Ordinance”) and common law passing off actions. In this newsletter we will discuss the latest development relating to enforcement under the Companies Ordinance.

What are “Shadow Companies”?

The shadow companies’ incorporation in Hong Kong and company records registered in the Hong Kong Companies Registry often give a false impression to majority consumers that these shadow companies are associated with or legitimate subsidiaries of the real brand owners, and the fact that these Hong Kong shadow companies are being often used to pass off as the real company in conducting business in the Mainland China.

As highlighted in the case of Exxon Mobil Corporation v USA Aisuo Lubricant Oil (China) Ltd [2014] HKCU 694, a "shadow company" has one or more of the following features:

1.        the key part of its name is identical or confusingly similar to the reputable name or mark of another person with whom it has no connection;

2.        its directors and shareholders are PRC individuals;

3.        its secretary is a Hong Kong secretarial company and usually involved in the incorporation of the shadow company;

4.        its registered office address is the same as that of its secretary or those providing secretarial services to it; and

5.        it backs licenses or otherwise authorizes or permits its name to be used by one or more persons in the PRC, usually a business entity set up by its director/shareholder.

Injunctive Relief for Brand Owners

The Hong Kong Courts are no strangers to legal disputes concerning these shadow companies and are ready to act proactively against them.  Brand owners may choose to consider taking injunctions against the shadow companies as one of the legal actions, as appropriate.

In Biostime International Investment Ltd v France Heson Paper (Hong Kong) Co Ltd [2015] HKCU 622, the plaintiff was an associated company incorporated by BiosTime Inc (Guangzhou), a company incorporated in the Mainland China and belonged to the group of companies described as the Biostime Group, being a well-known premium provider of pediatric nutrition and baby care products in the PRC.  The plaintiff was the owner of the “合生元” trade mark registered in Hong Kong (the “Biostime Trade mark”).  The defendant was incorporated in Hong Kong with the name France Heson Paper (Hong Kong) Co Ltd (法國合生元紙業 (香港) 有限公司) but was not associated with the plaintiff or the Biostime Group.  

In that case, the plaintiff successfully obtained injunctive relief to restrain the defendant from infringing the relevant Biostime Trade mark and to restrain the defendant from committing passing off. The Court of First Instance found that the defendant purported to be in the business of manufacturing and/or retailing baby care products relating to Biostime Group and had infringed the Biostime Trade mark by incorporating a company name similar to the Biostime Trade mark through the inclusion of the Chinese characters “合生元” and engaging in trade in relation to goods which were similar or identical to those registered under the Biostime Trade mark by the plaintiff.

Is a Court order to direct the Registrar to change the name necessary?

In the above Biostime case and Jusikhoesa Lock & Lock (Lock & Lock Co Ltd) & Anor v Lock & Lock International Brand Management Ltd [2016] HKCU 499, the Court of First Instance reiterated that such an order would be inappropriate and unnecessary as the Registrar of the Hong Kong Companies Registry (“Registrar”) can issue such direction based on a Court order restraining the shadow companies to use their name. 

Thanks to the section 108 of the Companies Ordinance, brand owners no longer need to seek an order directing the Registrar to change the shadow companies’ company names.   The Registrar may simply act upon a Court order restraining the shadow company from using the name or any part of the name to direct such shadow company to change its company name.

Implication

Although Hong Kong Courts appear to be willing and ready to assist the brand owners to combat shadow companies, to avoid any damage of the brand’s reputation caused by the shadow companies, brand owners should consider obtaining prior and sufficient trade mark registrations at the Hong Kong Trade Marks Registry in order to take actions against possible shadow companies and safeguard the brand’s intellectual property rights.

For enquiries, please contact our Intellectual Property & Technology Department:

E: ip@onc.hk                                                                    T: (852) 2810 1212 W: www.onc.hk                                                                F: (852) 2804 6311 19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

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 © 2018