On 5 September 2018, the Hong Kong Court of First Instance handed down a significant win to Hong Kong Broadband Network Limited (HKBN) in dismissing a trade mark infringement claim brought against it by the PCCW-HKT group (PCCW). The case is the first decision the Hong Kong Court has made on section 21 of the Trade Mark Ordinance (Cap. 559) (TMO) and provided important guidance on the use of trademarks in the context of comparative advertising.

HKBN was represented by the legal team from DLA Piper Hong Kong led by May Ng, Partner, assisted by Queenie Chan, Associate.

The Advertisements

The decision of PCCW-HKT Datacom Services Limited & Ors v Hong Kong Broadband Network Limited [2018] HKCFI 2037 concluded a three-year dispute between the two companies which started in 2015 when HKBN launched a marketing campaign making use of PCCW-HKT group’s trademark.

The advertisements used in the campaign contain straplines or catchphrases which reads: “PCCW Home Telephone Service customers say goodbye to bloated monthly fees”, “電訊盈科家居電話用戶唔駛再忍受咁大食嘅家居電話用費" etc..

Section 21 of the TMO

PCCW alleges that the use of its trademarks was an infringement under section 18 of the TMO. HKBN did not dispute the use of the trademarks in the advertisements but invoked section 21 of the TMO which allows the use of competitors' trademarks for identifying goods or services of the trademark owners in accordance with honest practices in industrial or commercial matters.

Section 21(2) of the TMO sets out the relevant factors that the Court may consider in determining honest practices include whether:

  • The use takes unfair advantage of the trade mark;
  • The use is detrimental to the distinctive character or repute of the trade mark; or
  • The use is such as to deceive the public.

PCCW argued that the exception under section 21 of the TMO does not apply. PCCW claimed that the use of the trademarks was without due cause and took unfair advantage of and/or was detrimental to the repute of the trademarks. PCCW complained that:

  • the use of the trademarks was to promote HKBN’s own services and to convey the message that consumers get a better deal from HKBN.
  • by using the expressions such as “bloated fees” and “大食” (literally, big eater or gluttonous) in the advertisements, HKBN conveyed the erroneous, unfair and/or misleading impression to the public that PCCW’s services are bloated, unduly excessive and/or unreasonable.

PCCW claimed that as a result of the infringement, the capacity of the trademarks to stimulate the consuming public’s desire to subscribe to PCCW’s service is impaired and the trademarks are discredited and denigrated.

On HKBN’s part, it was claimed that the tenor of the advertisements is that the home telephone service, and the bundled home telephone and broadband services provided by HKBN are less expensive than the same or similar services provided by the PCCW-HKT group. HKBN relied on evidence to show that at the time of the advertisements, the service prices for basic home telephone services and home broadband services were lower or consistently lower than those offered by the PCCW-HKT group. As such, by using the trademarks to identify the PCCW-HKT group and stating the truth in a fair comparison of the pricing offered, HKBN claimed that the advertisements did not take unfair advantage or free-ride on the repute of the trademarks.

On the interpretation of section 21 of the TMO, the Court confirmed that the primary objective of the section is to permit comparative advertising, and noted that, if comparative advertising is to be allowed, it is to be expected that the defendant advertiser will not paint the claimant’s goods in a particularly favourable light, and even an objective, fair and honest comparison is bound to undermine its competitor. As such, the concept of “unfair advantage” does not fit easily into comparative advertising and has to be applied in the proper context taking all relevant factors and circumstances of the case into account, and applying the objective test of a reasonable reader.

Case law from the European Court of Justice and the EU Directives which set out more stringent conditions to be met for comparative advertising to be permitted in the European Community may be guidance and useful references on the meaning of section 21 of the TMO but they have no binding effect in Hong Kong. The Court found that the question on whether and how comparative advertising should be regulated in Hong Kong should be matters for the legislature and not for the Court. And it will be unfair and inequitable to hold any defendant to the standards specified in the EU Directives which have never been publicized as being applicable to the market in Hong Kong.

The Court found that HKBN was able to establish a defence against the infringement claim under section 21 of the TMO as the advertisements does not take unfair advantage of the trademarks, is not detrimental to the repute of the trademarks and is not such as to deceive the public and that HKBN’s use of the trademarks was in accordance with honest practices in industrial or commercial matters.

The Court took the view that an average consumer in Hong Kong is savvy to advertising language, exaggeration and trade puffery and will not take advertising language seriously especially when colloquial and colourful exaggerated terms are frequently and commonly used in Chinese media in Hong Kong. Given that average consumers in Hong Kong are more than used to hyperbole and exaggeration, the words “bloated” and “大食” means no more than “expensive” in sensational and coloured language, as is usual in advertising. The Court also did not consider that the average reasonable reader will take statements in HKBN’s advertisements seriously to hold a view that its price will invariably be cheaper than PCCW in all cases or to find a derogatory or sinister meaning that PCCW is cheating its customers. The words simply poke fun at PCCW’s pricing and will be reasonably understood as such.

The Court accepted the entirety of the evidence adduced by HKBN, which includes figures compiled by HKBN’s market intelligence team and surveys by an independent consultant, the Judge found that PCCW’s prices for their home telephone and broadband services are more expensive than HKBN’s prices and indeed in most if not all cases, PCCW’s prices have been shown on the evidence to be most expensive of all the service providers in Hong Kong. The statements in the advertisements are therefore substantially and sufficiently true. It is not misleading to a substantial proportion of the reasonable audience, not dishonest, nor is it deceiving to the public.

As the statements in the advertisements are substantially true and not misleading, it was found that any advantage arguably taken by HKBN of the trademarks in comparative advertising is not “unfair”.

Finally, the Court found that the advertisements are not detrimental to the repute of PCCW’s trademarks. It is not disparaging to refer to PCCW’s services as being expensive as a high price tag may be perceived to be associated with better quality of service or may denote prestige and exclusivity, and even the PCCW-HKT group appear to accept that “price is not really the way that (they) compete” as expressed in the words of their managing director. It was further commented that a statement of truth cannot be detrimental to the reputation of PCCW’s mark, even if they found it uncomfortable to be confronted with a substantial truth.

PCCW’s claims of infringement was hence dismissed with costs awarded to HKBN.

Key Takeaway Points

Some key takeaway points from the case when you are comparing offers with competitors in advertisements:

  1. In marketing campaigns, you may use the trademarks of your competitors to identify them and to compare the pricing/quality of the services or goods so long as the statements in the advertisements are true, honest and not misleading.
  2. Hyperbole, puffery, coloured and/or sensational languages may be used but the choice of words should not be derogatory or inconsistent with the reputation of the competitor.
  3. If you wish to make statements that your pricing is lower than those of your competitors' or that the goods/services offered are more superior, you must ensure that you have sufficient documentary evidence to substantiate your statements including reliable market intelligence.
  4. It is not usually necessary to set out the details of the comparison against your competitors or an itemized analysis of the terms of the offers by the competitors in the advertisements. However, for compliance with the Trade Descriptions Ordinance (Cap. 362), the advertisements should provide some general information on the source of information for the comparison and also links/hotline where further details of your offer can be obtained.