Rebecca Sargent Jason Carmichael August 11 2015 Final appeal over tea brewing RPC | Litigation - Hong Kong Rebecca Sargent, Jason Carmichael Litigation IntroductionBackgroundLitigation historyCommentIntroductionTea is a very popular beverage in Hong Kong and, depending on how you take it, first impressions can count – which is why Tsit Wing (Hong Kong) Co Ltd v TWG Tea Company Pte Ltd is important. After several years of litigation, the case is headed for Hong Kong's Court of Final Appeal. Like many big-name disputes in Hong Kong, it has had an interesting and varied procedural history. While few disputes reach a final court with respect to matters such as tea, there seems to be an inevitability about the forthcoming final appeal – pitting, as it does, a well-known local tea business against a foreign rival in Hong Kong's competitive market.BackgroundThe plaintiff companies, part of the Tsit Wing Group, are well known and (among other things) long-established wholesalers and retailers of beverages in Hong Kong. The plaintiffs own a number of registered figurative trademarks in Hong Kong incorporating the letters 'TWG' (standing for 'Tsit Wing Group'), which are registered for tea and coffee.The defendant companies are younger operators in the tea shop business with international aspirations. They operate under the acronym 'TWG', which stands for 'The Wellness Group'. The defendants' business is headquartered in the rival city state of Singapore and has been operating tea salons under the 'TWG' name since 2008 in various cities. The defendants also supply high-end tea products internationally, including to airlines and hotels.In 2011 the defendants opened a tea salon in the famous International Finance Centre (IFC) mall in Hong Kong, which was branded and marketed using the sign 'TWG', both on its own and as part of a figurative oval mark, including the words '1837' and 'tea'. Shortly afterwards, the plaintiffs commenced legal proceedings against the defendants for alleged trademark infringement and/or passing off and sought an interlocutory injunction against the defendants restraining them from using the TWG sign in Hong Kong. The defendants sought to defend the claim on the basis that the marks used were not identical or confusingly similar.Therefore, the dispute goes back to early 2012 and has seen (among other things) an injunction granted against the defendants, various interlocutory skirmishes, success at first instance for the plaintiffs, an unsuccessful appeal by the defendants to the Court of Appeal and at least two applications to the Court of Final Appeal. The case is now set for a final appeal, following a recent decision of its Appeal Committee to grant the defendants permission to appeal.(1)Litigation historyInterlocutory injunctionThe plaintiffs obtained an interlocutory injunction following an application before a judge in January 2012, preventing the defendants from using the TWG mark in Hong Kong. The defendants, however, obtained permission to appeal the injunction by showing that they had a reasonable prospect of success – the test for a "reasonable prospect" basically being a prospect which is more than "fanciful without having to be probable".(2) In reaching a decision to grant the defendants leave to appeal, the judge noted that it was "not an exaggeration to say that the effect of the interim injunction on the defendants would be final, and the defendants may have to leave the Hong Kong market completely".(3) Therefore, the judge reasoned that the arguments deserved serious consideration. The matter progressed to an appeal hearing, where the interlocutory injunction was lifted based on an undertaking from the defendants agreeing to confine their business to the tea salon in the IFC until the resolution of the dispute.Court of First InstanceWith the injunction temporarily lifted and the defendants' undertaking in place, the dispute proceeded to a substantive trial in June 2013, where another judge found in favour of the plaintiffs. In respect of the claims for registered trademark infringement, the judge assessed the question of similarity between the plaintiffs' registered TWG trademarks and the defendants' TWG sign and whether there was a likelihood of confusion. The judge reached an inevitable conclusion that the two marks were similar and, therefore, there was a likelihood of confusion. The judge was also satisfied that the elements of passing off were met, finding that:the plaintiffs had established goodwill in Hong Kong;there was misrepresentation or a likelihood of deception on behalf of the public by the defendants' use of their TWG sign in Hong Kong; anddamage would be caused to the plaintiffs' business.(4)The plaintiffs were granted relief including the upholding of the injunction and discovery and directions for an account of profit or inquiry as to damages at their election.Court of AppealDissatisfied with the result, the defendants appealed on the basis that they did not agree with the judge's findings that the plaintiffs' registered trademarks were similar to the signs used by the defendants. The Court of Appeal dismissed the defendants' appeal and found for the plaintiffs, reaching the same conclusion that there was:"a high degree of similarity between the marks of the plaintiffs and the signs used by the defendants at the tea salon, and there is also a high degree of similarity between the goods for which the marks are registered and the goods and services offered by the defendants in using the signs."(5)Court of Final AppealPermission to appeal was initially refused by the Court of Appeal on the basis that it did not have a reasonable prospect of success.(6) The defendants then applied to the Appeal Committee of the Court of Final Appeal for permission to appeal and submitted nine questions for consideration concerning the interpretation of Hong Kong trademark law and the tort of passing off. The Appeal Committee granted leave to appeal pursuant to Section 22(1)(b) of the Court of Final Appeal Ordinance, confirming that six of the nine questions put forward by the defendants were of requisite importance and should be submitted to the Court of Final Appeal for decision.(7)The final appeal is due to be heard in January 2016.Comment It is not unusual in Hong Kong to see certain types of case work their way from the lower courts to a final appeal over the course of several years. This is such a case. Some cases take much longer, usually involving significant sums of money and/or points of principle, not to mention something of a fierce rivalry.Given the relative level playing field between the parties and the fact that they have their own specialist lawyers, Hong Kong is still one of the common law jurisdictions in which big players can slug it out if they are minded to, without too much interference from the courts. In such circumstances, the courts in Hong Kong are generally content to let the parties have a go, even if this leaves less scope for earlier resolution. It is probably an understatement to suggest that there is unlikely to be much prospect for mediation on the way to the Court of Final Appeal in this case. Unlike in some jurisdictions, there is no specific mediation scheme for civil appeals in Hong Kong.There is also the commercial point that for a relatively modest legal spend in getting to a final appeal hearing, the defendants get to have a final bite at the cherry.(8) While the defendants' prospects of success are probably not great, if they do succeed they will seek to overturn most of the costs orders in the courts below. A large factor driving such appeals can be the costs exposure for the losing party and the fact that – after all the time and effort put in thus far – little may be lost by chancing a final appeal.It will also be interesting to see whether one of the parties is sitting on a suitably timed sanctioned offer or sanctioned payment.Little should be read into the grant of permission to appeal by the Appeal Committee of the Court of Final Appeal – this is probably a sign that the Court of Final Appeal would like an opportunity to declare some jurisprudence on point.(9) Nonetheless, the overall impression of the marks and signs in dispute could cause confusion in the local market and first impressions can count.(10)The case and the forthcoming appeal raise special issues relating to (among other things) the proper approach in determining infringement of a registered trademark and aspects of the tort of passing off in Hong Kong.(11)For further information on this topic please contact Rebecca Sargent or Jason Carmichael at Smyth &Co in association with RPC by telephone (+852 2216 7000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.Endnotes(1) Pursuant to Section 22(1)(b) of the Court of Final Appeal Ordinance (Cap 484) - FAMV 6/2015, May 20 2015. Also see FAMV 6/2015, June 22 2015.(2) HCA 2210/211, February 10 2012, at Paragraph 4, and (for example) SMSE v KL  4 HKLRD 125 at Paragraph 17.(3) HCA 2210/211, February 10 2012, at Paragraph 11.(4) HCA 2210/2011, July 24 2013.(5) CACV 191/2013, December 3 2014, at Paragraph 98.(6) CACV 191/2013, January 29 2015, at Paragraph 17.(7) Supra note 1. See in particular Issues 1, 2 and 6.(8) For further details please see "Civil Appeals – one shot as of right only". As an aside, the Court of Appeal's judgment was handed down before the Administration of Justice (Miscellaneous Provisions) Ordinance 2014 came into force on December 24 2014.(9) After July 1 1997, considerations relating to decisions of the UK House of Lords (now the UK Supreme Court) and the UK Privy Council that prevailed before that date are no longer relevant, although their decisions are afforded great respect: Solicitor v Law Society of Hong Kong (2008) 11 HKFAR 117 (at Paragraphs 16-20).(10) The defendants' shop in the IFC mall is visible from the outside (on the south side). It appears for now that the sign 'Tea WG 1837' is in use. The afternoon trade appears to be brisk (eg, including office workers, shoppers, tourists, airport travellers and some students).(11) For example, see Section 18(1)-(4) of the Trademarks Ordinance (Cap 559) and, in particular, Section 18(3). The defendants appear to be up for the challenge; their lawyers have described obtaining permission to appeal to the Court of Final Appeal as "a significant victory" (www.hoganlovells.com/newsmedia/detail.aspx?news=3564). It is not uncommon for an appellant to win on some law, but still lose on the facts. As an aside, in order to succeed in a common law passing-off action, a claimant must establish goodwill in the jurisdiction in which the claim is made (for further details please see "UK goodwill reigns supreme").Warren Ganesh assisted in the preparation of this update.