In a recent landmark decision, Singsung Pte Ltd v LG 26 Electronics Pte Ltd (“Singsung”), the Court of Appeal (“CA”) had the opportunity to examine a number of novel legal issues concerning the tort of passing off, the doctrine of instruments of deception and the scope of liability for issuing groundless threats under s 200 of the Copyright Act that had not been fully considered by the Singapore Courts previously.
The owners of the two litigating companies were brothers who had started a trading business together but their relationship broke down after a couple of years. One of the brothers then incorporated the appellant company (“the appellant”) to carry on the business of exporting new electrical appliances manufactured in China to African and Asian markets. The majority of the appellant’s sales were made to foreign trade buyers who visited the appellant’s shop in Singapore and purchased the appellant’s products for export to their home countries for sale to the end users.
The other brother incorporated the respondent company (“the respondent”), which was located next to the appellant’s shop, to deal initially in second-hand electrical appliances, but later switched to the business of exporting new electrical appliances primarily to the African market.
The respondent’s business model was to “shadow the appellant’s business in terms of products, markets and packaging”. The respondent’s products were sourced from the same Chinese manufacturers and bore striking similarities to the appellant’s in their get-up and visual appearance, with the only difference between their respective products being the logo affixed to them. The appellant’s products bore the “SINGSUNG” mark, while the respondent’s products bore the “LS” mark.
Subsequently, the appellant commenced proceedings in the High Court (“HC”) against the respondent. The appellant’s main cause of action was in the tort of passing off on the ground that the get-up of the respondent’s products was identical or confusingly similar to the get-up of the appellant’s products (“the Singsung Get-Up”), which misled consumers into believing that the respondent’s products originated from or were associated with the appellant’s. The appellant also alleged that the respondent had infringed the copyright in artistic works contained in the Singsung Get-Up, to which the respondent counterclaimed for groundless threats of copyright infringement. The HC dismissed the appellant’s claims in passing off and copyright infringement, and allowed the respondent’s counterclaim for groundless threats of copyright infringement. The appellant then appealed against the HC’s decisions to the CA.
1. Passing off
The CA re-affirmed the basic principle that the tort of passing off seeks to protect the claimant’s goodwill in his business and not specifically his right to the exclusive use of a mark, get-up or logo. In other words, the tort seeks to prevent unfair competition through misrepresentation or deception by the defendant deceiving consumers into thinking that his goods originate from the other trader. Hence, the tort of passing off protects “a trader’s relationship with his customers”.
Where misrepresentation as to trade origin is concerned, the key question is “whether the defendant is putting forward goods, which it, in one way or another, is passing off as the claimant’s or as related to the claimant”.
a. Doctrine of instruments of deception
The law of passing off recognises the doctrine of instruments of deception, which addresses the issue of whether the defendant would have committed the tort of passing off if it had “put into circulation goods which are inherently likely to deceive ultimate purchasers or consumers, even though the immediate purchasers may be middlemen who are not themselves deceived and … may have ultimately disposed of the goods in a manner which does not deceive anyone at all.” The CA also noted academic commentary which suggested that the doctrine of instruments of deception should only apply where the goods are “inherently defective”, i.e. they “lie about themselves and have been so fashioned by the defendant”.
The doctrine of instruments of deception was considered in Singsung as the appellant’s business came not from selling the electronic appliances directly to consumers, but from selling them to middlemen who were not confused as to the origin of the goods in question. The issue was whether confusingly similar goods sold to such intermediate customers in the supply chain could give rise to a claim in passing off.
The CA held that where the instruments of deception are inherently deceptive, the supplier of those goods would be liable for passing off even if his direct customers, the middlemen, are not confused as to the trade origin of the goods. This is because under this doctrine, the tort of passing off is completed before misrepresentation or damage has occurred, so long as there is supply of the instruments of deception.
However, the CA did not make a finding as to whether the doctrine could be extended to potentially, as opposed to inherently, deceptive goods since the appellant’s pleaded case was that the respondent’s goods were inherently deceptive. Unlike inherently deceptive goods, potentially deceptive goods, according to the CA, requires something more to “turn these goods that are not confusingly similar in and of themselves into deceptive goods.”
b. Proving goodwill in cross-boundary businesses
The critical issue was whether the appellant possessed the requisite goodwill by supplying goods for export and whose sales to end users primarily occurred in foreign markets. The respondent contended that the appellant had no such goodwill in Singapore as the appellant’s customers were not Singapore-based or Singaporean.
The CA, however, held that the key requirement for goodwill to be established in passing off before a Singapore Court was that customers of the claimant’s business are within the Court’s jurisdiction when the claimant’s products are purchased, and it is not necessary that these customers are resident or domiciled in Singapore. So long as the claimant’s business offered a product or service for sale in Singapore, and the customer purchased the product or consumed the service in Singapore, goodwill would be established in Singapore. On the facts, given that the appellant had a business presence in Singapore and the foreign trade buyers actually purchased the appellant’s products at its business premises in Singapore, they were the appellant’s customers within Singapore. Therefore, the appellant had the requisite goodwill regardless of where the appellant’s products were eventually consumed.
c. Misrepresentation and deliberate copying
The threshold issue in determining whether the respondent had misrepresented the trade source of its products was whether the Singsung Get-Up was distinctive of the appellant’s products. The CA observed that “[d]istinctiveness is generally considered in relation to the class of consumers of the goods in question (i.e., the relevant public)”. However, as there was little direct evidence from the foreign trade buyers or the end users of the distinctiveness of the Singsung Get-Up, the CA considered the appellant’s alternative argument that distinctiveness may indirectly be proved through evidence of the respondent’s deliberate copying.
The CA held that deliberate copying itself would be insufficient to establish distinctiveness. Where there is evidence of deliberate copying and an intention to deceive customers, these taken together will point strongly towards the conclusion what has been copied is distinctive, and also that there has been misrepresentation by the defendant and hence, a likelihood of confusion exists. However, deliberate copying may not necessarily indicate an intent to deceive. The CA noted that a defendant should not be prohibited from copying features that are not distinctive of the claimant of its goods because there is no misrepresentation or deception as to origin. The Court must assess all the facts of the case including:
- the defendant’s explanation for the similarities;
- the circumstances in which the defendant carried out the copying;
- the extent of the defendant’s copying; and
- whether the defendant attempted to sufficiently distinguish its goods from that of the claimant.
On the facts of Singsung, the CA found that the respondent’s sales strategy was to sell its products by deception. The CA took into account the respondent owner’s admission at trial that he “had deliberately sourced for and produced items which were similar or identical in appearance to the appellant’s goods”. The respondent’s copying also extended to the business methods employed by the appellant and even the content and layout of the appellant’s warranty cards.
Hence, the CA found that the Singsung Get-Up was distinctive of the appellant’s products because “the respondent, by copying the Singsung Get-up, intended to deceive end users in the relevant export jurisdictions that the respondent’s goods are those of the appellant, or of an entity economically linked to the appellant”. Regardless of whether the end users knew of the appellant’s identity, they were “attracted to the Singsung Get-Up for the particular source that lay behind it”. It followed that there had been misrepresentation by the respondent and a likelihood of confusion therefore existed.
The CA also held that the tort of passing off was complete under the doctrine of instruments of deception by the supply of the respondent’s products to foreign trade buyers for resale to end users overseas. The CA found that the respondent’s products were inherently deceptive because “they [told] a lie about themselves”.
d. No issue as to damage
Given the respondent’s misrepresentation, the CA held that damage was established as the appellant’s goodwill would be adversely affected through the diversion of the appellant’s customers to the respondent. In addition, under the doctrine of instruments of deception, the supply of the respondent’s goods was sufficient to constitute damage, and it was unnecessary to show real or potential damage.
2. Copyright infringement and groundless threats of legal proceedings
The appellant’s copyright infringement claim was concerned with artistic works comprised in three individual get-ups of the Singsung Get-Up: two pictures in the packaging and design of certain DVD players (“the White Get-Up Picture” and “the Blue Get-Up Picture” respectively, and a sticker indicating that a certain television set is ultra-slim (“the TV sticker”)).
The CA allowed the appellant’s appeal on the copyright infringement claim for the White Get-Up Picture and the TV sticker, but not for the Blue Get-Up Picture. However, the CA held that the appellant was not liable for groundless threats of legal proceedings for the Blue Get-Up Picture. Acknowledging that the general rationale behind the groundless threats provisions is to provide a statutory remedy for aggrieved parties whose business or reputation might be affected by threats emanating from another party without the need to prove bad faith on the part of the threatening party, the CA held that there was little damage to the respondent’s business as a result of the appellant’s letter of demand, which could be adequately compensated by a costs order.
In the course of its analysis, the CA made a few observations on groundless threats provisions:
- these provisions had incentivised the commencement of suits rather than encouraged alternative dispute resolution and out of court settlement of disputes. The CA noted that, as in England, there was a growing emphasis on alternative dispute resolution in Singapore;
- groundless threats provisions have not been consistently applied and rationalised across the range of intellectual property rights. For instance, no groundless threats prohibition exists for the tort of passing off. Also, s 35 of the Trade Marks Act prohibits action for groundless threats for primary infringement of a trade mark, but s 200 of the Copyright Act does not make a similar distinction between primary and secondary infringement; and
- the “unintended ‘chilling’ effect” that groundless threats provisions may have for small and medium sized firms, in the face of “the prospect of costly litigation and exposure to liability … to larger businesses with greater financial resources”.
The CA decision in Singsung is an important decision for businesses as it has redefined and streamlined the proper considerations to be taken into account in passing off actions involving alleged misrepresentation as to trade origin. These considerations seek to achieve the right balance between “the protection of fair competition” and the prohibition of “unfair competition brought about through deception or misrepresentation as to … the origin of goods”.
Another area where a better balance between competing interests may be needed concerns groundless threats provisions, where safeguarding existing intellectual property rights and protecting against unjustified threats are equally important. It remains to be seen whether the CA decision in Singsung will prompt law reforms in this area.