Introduction

Operation Smile, Inc. (“Operation Smile”) is an international medical charity founded in 1982 in Virginia, the United States. It provides free surgeries for children and young adults in developing countries who are born with cleft lip, cleft palate or other facial deformities. Operation Smile has established goodwill internationally since its inception through the various healthcare examinations and charity funded surgeries for children born with the facial deformities and through hosting charitable and promotional activities to fulfil humanitarian objectives. Unfortunately, Operation Smile became embroiled in a trade mark dispute with its offshoot when the offshoot organisation continued to use Operation Smile’s trade marks despite termination of their association.

Background

In 1991, Operation Smile initiated a successful mission in China, which gradually established goodwill for the charity in Asia. “Operation Smile – China Medical Mission Limited” (“Operation Smile China”) was hence set up in 4 June 1992 with the express purpose to further Operation Smile’s efforts in Hong Kong, Macao, and China.  Whilst Operation Smile China had provided medical services under and by reference to the trade mark “Operation Smile” in Greater China, no formal application for registration of the mark was made or any licensing agreement was entered into between the parties prior to their dispute.

Since 1998, Operation Smile has been the registered proprietor of the trade mark “OPERATION SMILE” (Trade Mark No. 2000B04291AA) in respect of the provision of health care and professional training programs and medical services in classes 41 and 44 in Hong Kong. There are two variants of the trade mark as shown below: one with the two words “Operation Smile” separated by a motif representing a globe, and the other with the same motif only, with no words.

Notwithstanding the registration of the OPERATION SMILE mark in Hong Kong, Operation Smile did not request its offshoot to sign a formal licence agreement.

However, in around May 2009, the general manager of Operation Smile China expressed in an email to a colleague concerns about protecting Operation Smile China’s intellectual property rights, after learning that some staff of Operation Smile China planned to register Operation Smile China in their own name such that they may sell or rent the trade mark back to Operation Smile China. Operation Smile, upon learning of such threat, and upon Operation Smile China’s refusal to enter into a formal licensing agreement, gave notice to Operation Smile China in 30 September 2014 that all licences and consents granted to Operation Smile China was to be terminated and that Operation Smile China should “cease and desist” from using any of Operation Smile’s intellectual property.

On 19 May 2015, Operation Smile China changed its name and registered it as “Beam International Foundation Limited”, but persisted in using Operation Smile’s name as a prelude to its own domain and website (“operationsmile” and “opsmile”). As such, Operation Smile brought proceedings against Operation Smile China for infringement of its trade marks and for passing off in Hong Kong. Operation Smile China argued that it shared goodwill in the trade marks with Operation Smile.

Judgment

On 30 November 2017, the Judge at the Court of First Instance found in favour of Operation Smile, and was of the opinion that Operation Smile China had blatantly infringed upon Operation Smile’s intellectual property rights. A summary of the reasons for the decision is set out below:

1. It was incontrovertible that Operation Smile China was under the aegis of Operation Smile. Operation Smile and Operation Smile China were seen to be and were acting as one and the same. In other words, Operation Smile China was the “alter ego” of Operation Smile and was enjoying Operation Smile’s goodwill, name and trade marks.
2. On the evidence, Operation Smile China did not share goodwill in Hong Kong and China with Operation Smile as Operation Smile China had failed to show that Operation Smile’s trade marks or name had ceased to be distinctive, nor had Operation Smile China shown that Operation Smile’s goodwill had been extinguished.
3. Operation Smile China’s post-termination acts misrepresented their relationship with Operation Smile and were designed to deceive, or were likely to confuse, the public and attract donations and sponsorship from benefactors who intended them for Operation Smile. Operation Smile China and Operation Smile were no longer associated and Operation Smile China had no right to continue using Operation Smile’s name.

Takeaway Points

This case illustrates the importance of planning ahead in relation to intellectual property rights protection and the importance of centralised trade mark ownership if there are many sub-organisations in different jurisdictions. One way that Operation Smile could have prevented such costly litigation would be to enter into an intellectual property licensing agreement with Operation Smile China from the very beginning, irrespective of their intellectual property have/could obtained registration or not. Such intellectual property licensing agreement could include provisions to prevent licensees from registering the trade mark in their own names and to ensure that, at the termination of such licensing agreement, the goodwill and reputation accrued through use by the licensees would remain attached to the trade mark itself.