Background

In Louis Vuitton Malletier v Cuvee XLV French Wine Ltd [2019] HKCFI 1963, Louis Vuitton Malletier (the “1^st Plaintiff”), the holder of the well-known French luxury brand name “LOUIS VUITTON”, and its parent company LVMH Moët Hennessy Louis Vuitton sued a Hong Kong wine distributor Cuvee XLV French Wine Ltd (the “1^st Defendant”) and its sole director and majority shareholder Mr Wong Sau Ying (the “2^nd Defendant”) for trade mark infringement and passing-off.

The Defendants used the sign “XAVIER-LOUIS VUITTON” (the “XLV Sign”) in marketing, selling and distributing wines which bore the XLV Sign (the “Wines”) and alleged that Mr Xavier-Louis Pierre Vuitton (“Mr Xavier Vuitton”) was the person producing and marketing the Wines. As the eldest member of the 5^th generation of the Vuitton family, Mr Xavier Vuitton used his real name “XAVIER-LOUIS VUITTON“ and its acronym “XLV“ to indicate that the Wines were his own products. 

The Court of First Instance (the “Court”) considered and discussed the 2 causes of action pleaded by the Plaintiffs, namely (1) infringement of the 1^st Plaintiff’s well-known trade mark under the Paris Convention and S.18 (4) of the Trade Mark Ordinance (Cap. 559) and (2) passing-off. The claims were laid against both Defendants jointly and severally, on the basis of common design, or alternatively, the 2^nd Defendant’s inducement or procurement of the 1^st Defendant’s infringing acts.

Trademark infringement

Well-known trade mark

S.18(4) of the Trade Mark Ordinance provides protection to a trade mark which is recognized as a well-known trademark, even though the Classes for which the goods and services are registered by the plaintiff is different from that in which the defendant uses the goods or services with an identical or similar trademark.

The Court contended that there was no serious dispute that “LOUIS VUITTON” was a well-known trademark in Hong Kong as a prestigious luxury goods brand. There was also a substantial oral and visual overlap between the Plaintiffs’ trademark and the XLV Sign. As the Plaintiffs’ mark was inherently highly distinctive, the use of the XLV Sign might call to the minds of the public the earlier and well-known mark of  “LOUIS VUITTON”. As the prestigious image of the Plaintiffs’ brand may enhance the quality and image in the minds of average customers, the Defendants were deemed having used the XLV Sign to take unfair advantage. Lastly, Mr Xavier Vuitton only acted as a middleman who selected the vineyards and casks of wine owned by others. He was far from being the winemaker so there was no compulsion nor other legitimate reasons to print his name, particularly with the dubious choice of “XAVIER-LOUIS VUITTON” instead of his full name “Xavier-Louis Pierre Vuitton”, on the Wines. Upon the above grounds, the Court ruled that the Defendants infringed the trademark of the Plaintiffs under S.18(4) of the Trade Marks Ordinance.

Passing-off

The Court considered the 3 elements of passing-off, namely (1) the goodwill of the plaintiff; (2) misrepresentation by the defendant and (3) the likelihood of damages, and ruled in favour of the Plaintiffs. Although the Plaintiffs, whose brand was well known in the fields of fashion, leather goods and jewellery, may not operate in the same field of wines, the Court clarified that it was no rule that the plaintiff and the defendant must operate in the common field of activity. The centre of the issue was whether there was a risk of confusion or deception.

Liability of the 2^nd Defendant

Considering the roles of the 2^nd Defendant, being the sole director and majority shareholder of the 1^st Defendant, the Court ruled that he was also liable as a joint tortfeasor. Upon the 2 alternative bases which the Plaintiffs pleaded joint tortfeasorship, namely the “common design” claim and the “inducement and procurement” claim, the Court held the 2^nd Defendant liable on both bases.

Citing an English authority Fish & Fish v Sea Shepherd UK [2015] AC 1229, the Court specified 2 separate requirements that must be proved to establish the liability of the 2^nd Defendant on common design, namely, (1) the 2^nd  Defendant must have acted in a way which furthered the commission of the tort by the 1^st Defendant; and (2) the 2^nd Defendant must have done so in pursuance of a common design to do or to secure the doing of acts which constituted the tort.

The 2^nd Defendant, apart from being the sole director and majority shareholder of the 1^st Defendant, also held out himself as the “President” of the 1^st Defendant and personally promoted the Wines in public events. The Court as such considered him the “mastermind” and the “public face” of the 1^st Defendant. Further, the 2^nd Defendant was the distributor of the Wines acting in his own capacity between 2006 to 2008 and entered into a distributorship agreement with other downstream distributors for distributorship in Hong Kong and Macau. The Court deemed him personally liable for acts of infringement and passing off during this period.

Finally, the 2^nd  Defendant personally made the trademark application of “XAVIER LOUIS VUITTON” to the Trade Mark Registry in Hong Kong, though the application was no longer pursued before the trial. If the registration application did go through successfully, the 1^st Defendant could only legally use the trademark with the 2^nd Defendant’s consent or licence in Hong Kong. Again, the Court regarded him as the mastermind of the sales business of the Wines.

The other partner of the 2^nd Defendant, whom was not named but claimed by the 2^nd Defendant to be a shareholder of the 1^st Defendant, have a “large say” and have had invested substantial capital in the 1^st Defendant, was however not found liable by the Court. First, there was no evidence on the part played by any third parties except the 2^nd Defendant and the central role of the 2^nd Defendant in every aspect of the business was exemplified by his active participation in the marketing of the Wines and his use of his personal business relationship to identify downstream distributors for the Wines.

In view of the central role of the 2^nd Defendant taken in the 1^st Defendant, the Court found that the 2^nd Defendant was liable as a joint tortfeasor, given that (1) he took part in the infringing act of the 1^st Defendant pursuant to common design and (2) he procured the infringing act of the 1^st Defendant. The Court found both Defendants liable on the 2 claims pleaded by the Plaintiffs, namely the trademark infringement claim and the passing-off. The Court granted an injunctive relief as well as a declaratory relief to the Plaintiffs declaring that they are well-known trademarks. 

Key takeaways

From the decision, it can be observed that the liability of a shareholder or a director towards the infringing acts of a limited company will not be bounded by the corporate veil. Personnel holding a heavy stake or playing a central role in a limited company may also be held liable as a joint tortfeasor, especially those of a family business who often conduct business in their own names.

Shareholders and directors should be cautious and take active steps to prevent the potential infringing acts of the limited company. Pre-emptive cautionary measures could be taken to restrain the liability of such personnel. It is always prudent to seek legal advice when doubt remains as to the legitimacy of the use of a trademark.