Attorneys Sebastian Hughes, Barbara W.K. Mok and Iain C.L. Seow at Jones Day and Adelaide Yu of Yu and Partners, member of Rouse & Co International, advocate a broader interpretation of the Hong Kong Companies Ordinance provisions to prevent 'shadow companies' registering in the Companies Registry.
"These bogus companies are incorporated by mainland Chinese shareholders under Hong Kong’s liberal company registration procedure, using names that mimic well-known trademarks. They are then used to create sham licences or letters of authorisation purporting to authorise use of the trademarks in China."
Emma Barraclough quoted Anne Choi of Wilkinson & Grist about these shadow companies for the magazine Managing IP: "We have seen cases where factories in China that have made products that infringe another company's trade mark have been sent an authorization letter from one of these companies to use the infringing logo. We have to tell the Chinese authorities that are conducting a raid that this is not the same company that owns the trade mark," said Choi. "[Making fakes is] the whole point of registering these company names and that's why the problem is so rampant."
The Hong Kong Companies Registry is interpreting the Companies Ordinance restrictive so it cannot take effective measures in the case a well-known brand owner wants these shadow companies. Only when the company name in question is virtually identical to an existing registered company name.
Relevant provisions of the Hong Kong Companies Ordinance include:
Hong Kong's Companies Ordinance Chapter 32, Section 22(2):
Where a company has been registered by a name which-
(a) is the same as or, in the opinion of the Registrar, too like a name appearing at the time of the registration in the Registrar's index of company names;(b) is the same as or, in the opinion of the Registrar, too like a name which should have appeared in that index at that time; or(c) is the same as or, in the opinion of the Registrar, too like the name of a body corporate incorporated or established under any Ordinance at the time of the registration,
the Registrar may within 12 months of that time, in writing, direct the company to change its name within such period as he may specify.(Replaced 60 of 1990 s. 5)[cf. 1985 c. 6 s. 28 U.K.]
which enables the Registry to direct a company to change its name if, in the opinion of the Registry, it is "the same as" or "too like" an existing registered company name, provided an application is made to the Registry within 12 months of the date of registration of the company.
So the Registrar of Companies is empowered to direct a company to change its company name if it is the same as or "too like" the name of a company that has already been registered, however the Registrar of Companies interprets "too like" in a narrow way. If the new company name indicates it is involved in a different kind of business, it is probably not considered as "too like" by the Registrar.
which enables the Registry to direct a company to change its name if, in the opinion of the Registry, "the name by which a company is registered gives so misleading an indication of the nature of its activities as to be likely to cause harm to the public." There is no time limit for an application under Section 22A.
1) If in the opinion of the Registrar the name by which a company is registered gives so misleading an indication of the nature of its activities as to be likely to cause harm to the public, he may direct it to change its name. (2) A direction given under this section to a company shall, if not duly made the subject of an application under subsection (3) to the court, be complied with within a period of 6 weeks from the date of the direction or such longer period as the Registrar may think fit to allow.(3) A company to which a direction is given under this section may, within a period of 3 weeks from the date of the direction, apply to the court to set the direction aside, and the court may set it aside or confirm it; and if it confirms it, it shall specify a period within which it shall be complied with.(4) If a company makes default in complying with a direction under this section, it shall be liable to a fine and, for continued default, to a daily default fine. (Amended 7 of 1990 s. 2)(5) Subsections (4) and (5) of section 22 shall apply in relation to a change of name under this section as they apply in relation to a change of name under that section. (Added 6 of 1984 s.13)[cf. 1967 c.81 s.46 U.K.]
Section 291 is also relevant. It empowers the Registry to strike off a company. However, before the Registrar of Companies will invoke Section 291, it must be satisfied that the company is not carrying on business or in operation. The section requires the Registrar of Companies to first send a letter to the company that is the subject of a complaint inquiring whether the company is carrying on business or in operation. As long as the company replies simply saying that it is carrying on business the Registrar cannot proceed to strike off the company under the Section 291 provisions. The company is not required to prove whether such statement is true or not.
According to Adelaide Yu, partner of Yu & Partners, a member of the Rouse & Co International Group, in Hong Kong, these companies are just a sample of the companies whose trade marks have been included in the names of unrelated companies registered in Hong Kong:
- Audio Panasonic (HK) Electronics Limited;
- Panasonic Air Conditioner Industry (HK) International Limited;
- HK Toshiba Appliances Limited;
- Japan Toshiba Electricity (HK) Co Limited;
- HK Universe Sanyo Appliance Int'l Group Limited;
- HK Int'l Sanyo Group Share Limited;
- Japan Shiseido (HK) Cosmetics Limited;
- Japan Shiseido (Hong Kong) International Cosmetics Group Limited;
- USA Adidas (Int'l) Industry Development Group Ltd;
- USA Adidas (Int'l) Sports Goods Co Ltd;
- Hong Kong Philips Lighting Electric Limited;
- Philip Electric (HK) Group Ltd.
Yu is pointing out that it's very easy to register a company and trademark in Hong Kong. "Since 2004, companies have only needed to have one director and one shareholder. This has made it even easier for counterfeiters in China to incorporate shadow companies. And it has become quicker and easier to register a trade mark in Hong Kong since a new trade mark law came into force in April 2003. The new law says that so long as the mark being applied for is inherently distinctive, the Hong Kong Trade Marks Registry will accept it. "
Read Yu's article for Managing IP here and Hughes' article for the Financial Times here and the Jones Day article here.