Do Trademarks Killl? Or Are They Victim? A Hong Kong Story With A Happy Ending

Florence Ka-Yee Lam, lawyer at Wilkinson & Grist which was already founded in 1860, wrote an interesting legal brief for IAM magazine on a current decision by the trademark registry of Hong Kong that upheld the registration of Philip Morris' trademark Marlboro Lights, see here.

When one reads the original decision of the Trademark Registry of Hong Kong one can ask why this relatively simple case had to take around 5 years before a decision was taken. The application for revocation was filed September 22, 2006 and an amended version was filed December 11, 2006.

Annelise Connell asked the Trademark Registry of Hong Kong to revoke trademark Marlboro Light, based on Caption 559 Section 52 Trade Marks Ordinance:

“(2) The registration of a trade mark may be revoked on any of the following
grounds, namely –
 …
(c) that in consequence of the use made of it by the owner or with his
consent, in relation to the goods or services for which it is registered, the 
trade mark is liable to mislead the public, particularly as to the nature, 
quality or geographical origin of those goods or services: or …

Ms Connell's arguments are that the word “lights” in combination with cigarettes gives the false impression that Marlboro Lights are less harmful than Marlboro Red or other Marlboro cigarettes that do not contain the descriptor “lights”. Research has shown that light cigarettes are no less harmful, but that the perception amongst smokers is that Marlboro Lights cigarettes are less harmful. This perception might be based on  news about machine tests that measured that tar output of lights cigarettes was lower. However, humans are no robots, and managed to inhale more tar than could be measured with robots.

Ms Ling Ho, of Clifford Chance argued successfully for Philip Morris, that no distinction, in terms of health warnings to be applied to all cigarettes packs of all types of cigarette sold in Hong Kong since 1982, had ever been drawn between tobacco products producing lower tar yields and others.
According to the registrant, the applicant did not show sufficiently a serious risk for an average consumer, who is deemed to be reasonably well informed, reasonably observant and circumspect. In other words the registrant asserts: people know that smoking is bad for your health, all smoking. This is an important point, because deception has two parties, the deceiver and the one that is or is not susceptible for the deception.

Section 52 (2)(c) starts with "that in consequence of the use made of it by the owner or with his consent". According to the registrant, the public health authorities were responsible for the erroneous belief that low tar cigarettes are less harmful to health. 

Ms Lam writes: "Thus, even assuming that the use of the subject mark was liable to mislead the public, the applicant had also failed to establish that the alleged deceptiveness of the mark was the consequence of the use made by it by the registered owner." 

Trademarks are just as kitchen knifes, which can be used by third parties in a culinary or in a homicidal way. 

Time for slogans

This Marlboro Lights case reminds me of the former city marketing slogan (trademarked) of the Hong Kong Tourism Board: Hong Kong, The City of Life! Isn't this deceptive? If, out of every 100,000 deaths in Hong Kong, 43 can be blamed on air pollution? I suggest the following slogan: Hong Kong people should get rid of pollution before pollution gets rid of Hong Kong people. Read more here. Hong Kong City of Fatal Attractions might be better? My beloved Hong Kong has now chosen, together with many other Asian cities I am sure, for the more generic Asia's World City. I know HK can do better than this.

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iPad, youPad, wePad? Who Is the Owner of the Trademark in China?

iPads for sale in the Apple Store at Central, Hong Kong
 Photo Danny Friedmann

Apple introduced a third category, in between a laptop and smartphone, on January 27, 2010 (see the late Steve Jobs give the presentation here and demonstration here and here). April 3, 2010 it was intoduced in the U.S. and one month later in other places around the world. Two months later already a million of these devices were sold. And according to Reuters, Apple has sold 15.43 million iPads in the last 14 weeks of 2011.

So Jobs vision became reality. But how to name this third category? 

" ... and we call it the iPad." 

That other companies had already registered the name iPad in some jurisdictions could be solved, so the thinking went. For this purpose Apple set up a special purpose company to acquire these trademarks in all relevant jurisdictions. The name of the company IP Application Development Limited is interesting, because abbreviated it is IPAD Ltd. 

In the acquisition process, or rather effort to assign the trademark, a mistake was made. IPAD Ltd. and Proview Holdings, Proview Electronics (Taiwan) and Proview Technology (Shenzhen) entered into a written agreement, December 2009, whereby they agreed to sell, transfer and assign the Chinese trademark of iPad to IPAD Ltd. for £35,000. However, in the written agreement Proview Electronics (Taiwan) pretended to be the proprietor of the trademark and "assigned" the trademark to IPAD Ltd. But the real proprietor was Proview Technology (Shenzhen). John Paczkowski seems to have gathered some of the documents, see here. Then Proview Technology (Shenzhen) started to try to enjoin the sale of iPads in China for alleged infringement of their iPad trademark, and was successful in cities such as Shijiazhuang and Huizhou, according to David Levine in an article for Reuters. Or, if Apple wanted to avoid getting banned from the Chinese shops and gain control over the iPad trademark, they had to pay 10,000 U.S dollar. 

Also it became clear that Proview Technology (Shenzhen) had lodged applications with the Trademark Office, part of the State Administration for Industry and Commmerce, to transfer the Chinese iPad trademarks to Yoke Technology on May 7, 2010. 

The mistake by IPAD Ltd/Apple could have been easily prevented. If you go to Trademark Search of China's Trademark Office, part of State Administration for Industry and Commerce, and type in IPAD in class international trademark 9, you will see that Proview Technology (Shenzhen) registered the trademark January 10, 2000, see registration number 1590557 and that the effective period of exclusive right: June 21, 2011-June 20, 2021, however, it seems to be repealed because of non-use for three years). Also Proview Technology (Shenzhen) has registered the stylized version of the trademark, international trademark class 9, under registration number 1682310, application date September 19, 2000. Effective period of exclusive right: December 14, 2001- December 13, 2011. Continued after objection. So at least IPAD Ltd could have easily found a starting point to trace who owns the iPad trademark for international trademark class 9. 

Everybody knows Apple these days, but Proview used to be famous too. Proview Group is a producer of display devices, which  include LCD monitors, CRT monitors and flat-panel digital products. It has operations and offices around the world, including Taiwan, Mainland China (Shenzhen and Wuhan), Hong Kong and Europe. Proview Holdings was incorporated in Bermuda and is listed on the Hong Kong Stock Exchange. Proview International Holdings Ltd was the first Taiwanese technology company to list in Hong Kong, and was quite successful. In 1999 it teamed up with U.S. chip maker National Semiconductor "to launch the I-PAD, a stripped-down desktop computer whose main selling points were its Internet connectivity and ease of use." Then Proview was hit by the financial crisis and May 12, 2010, the Hong Kong Stock Exchange issued a notice that trading of Proview Holdings’ shares had been suspended. Read here Jeremy Wagstaff and Lee Chyen Yee's Reuters article on Proview's rise and demise, see here.

Timeline

May 20, 2011, Apple Inc. and IPAD Ltd filed a lawsuit in Hong Kong against Proview International Holding Ltd, Proview Electronics Co (Taiwan) Ltd, Proview Technology (Shenzhen), Yang Rong-Shan (founder of the Proview Group and  chairman and CEO of Proview Holdings who was adjudicated bankrupt on August 2, 2010) and Yoke Technology (Shenzhen). The Hong Kong case reveals many of the relevant facts: High Court Of The Hong Kong Special Administrative Region Court Of First Instance, Action no. 739 of 2010  (HCA739/2010). On June 28, 2011 the Poon J. (潘兆初法官), decided and July 14, 2011 he motivated his decision to allow  the interlocutory injunction and restrain the defendants to "sell, transfer, assign, otherwise dispose of and/or give good title" to the Chinese iPad trademarks. 

May 24, 2010, Apple instituted proceedings against Proview Technology (Shenzhen) in the Shenzhen Intermediate People’s Court and filed an application for Asset Preservation Order (APO) in respect of the Chinese iPad trademarks. June 12, 2010 the application was granted on 12 June 2010, subject to the APOs obtained by some other Mainland banks.

Proview Technology (Shenzhen) has started suing Apple resellers at the Shenzhen Futian District Court (December 30, 2011) and Huizhou Intermediate People's Court (January 7, 2012), read Katrin Hille's FT article here and about Apple losing there here, at Stan Abram's China Hearsay.

According to Shenzhen Media People’s Court Apple lost its trademark ownership on December 6, 2011, see Huang Mengren's article here. Apple decided to appeal at the Guangdong Higher People's Court.
February 22, 2012, there was a trademark infringement case between Proview and Apple at the Shanghai  Pudong New Area People's Court. Apple was successful to the extent that Apple's iPads were not banned from the shelves. But as Stan Abrams of China Hearsay made clear, see here and here, the real question is who owns the iPad trademark. This will be decided at the Guangdong Higher People's Court, February 29, 2012.

In the mean time Proview Electronics (Taiwan) has accused Apple of fraud in a lawsuit filed at the Superior Court of California, County of Santa Clara. See here. However, in contrast to trademark lawyer Martin Schwimmer of The Trademark Blog, who was quoted by David Levine responding to the case: "I have never encountered this level of ruse", see here: I think it is not so strange nor unusual if you set up a special purpose company for the acquisition of a name such as iPad. Especially since iPhone is so ubiquitously known that if Apple pursued the trademark iPad, it would have definitely driven up the price, as this case proofs: from 35,000 pounds to 10 million U.S. dollars. There is no legal requirement to disclose the reason why you want to buy a trademark. Or is there?

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Sanrio Brand Licensor Says The Darndest Things, Or Maybe Not

TGIF

Peter Ollier wrote an article about how Disney and Sanrio are licensing some of their brands in China.

Licensable "cuteness" popular among Hong Kong population
Lanham Place, Mong Kok
Photo: Danny Friedmann

Roberto Lanzi, president of Sanrio Consumer Products for Europe, Middle East and Africa, was speaking at a panel called "Licensing and the flourishing region: Asia", at a conference during the 10th annual Hong Kong International Licensing Show. Mr Lanzi said that he was the only speaker on the panel that did not hate counterfeits.

He claimed to feel relieved when he once saw fake Hello Kitty products being sold in Hong Kong's Ladies Market:

"When Hello Kitty disappears from there we might be dead."

However, the Ladies Market in Mongkok, has been removed by the USTR from the list of Special 301 Out-of-Cycle Review of Notorious Markets, on December 20, 2011, see here.
Maybe that is the reason why Mr Lanzi is president for Europe, Middle East and Africa, and not Asia.

UPDATE: In a reaction (still have to verify the identity of commenter) Roberto Lanzi wrote: "I never mentioned Lady's market, I spoke about Temple Street and I was just jocking. Best regards Roberto"

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Rethinking Intellectual Property Protection in Hong Kong

After the welcome remarks by professor Douglas Arner (head Department of Law, HKU) and the opening speech by Peter Cheung, (director IPD, HKSAR Government) see here, the first panel presentation of the Round Table event organised by Law & Technology Centre of HKU and IP Law Center at Drake University started, moderated by assistant professor Haochen Sun, of the Faculty of Law, HKU.

Assistent Professor HKU Haochen Sun is moderator
Photo: Danny Friedmann

Professor Alice Lee, Associate Dean, Faculty of Law HKU gave a presentation entitled: "Reflections on Intellectual Property Reform in Hong Kong"

Professor Lee explained that the Hong Kong Copyright, Trade Marks and Registered Design Ordinances of 1997 did not change dramatically the substantive rights, in contrast to the patent reforms. Hong Kong amended its Patent Ordinance, June 27, 1997 and on February 22, 2008. The Patent Ordinance probably will be amended again after the government have considered all responses to its consultation paper (consultation period ended December 31, 2011). Given the limited time, Professor Lee focused on possible reform of small-term patents, instead of on possible reforms of standard patents, (read more about Hong Kong's need for an Original Grant Patent in combination with reciprocity and Hong Kong's potential as regional legal hub here), nor on whether there should be regulations for patent agents in Hong Kong.

Hong Kong is in need for a balanced approach for the short-term patent, which is relatively cheap and easy to get, since there is no substantive examination for a protection of 8 years. However, Professor Lee is concerned that the short-term patent might be prone to abuse. She illustrated this with the Octopus Card Limited v ODD.HK Limited case.

The conflict was about the validity of two short-term patents registered in the name of ODD.HK Limited. A judgment delivered on March 17, 2009, by Deputy High Judge Chen Jiangyao (陳江耀), whereby Madam Fung Wai Mun Polly was unrepresented, HCMP104/2007, ordered the revocation of the two patents with costs to the petitioner, because both patents lack novelty and creativeness (兩項發明都不是新穎和沒有創造性). Madam Fung Wai Mun Polly of ODD.HK Limited simply removed the chips from the Octopus Card (with which you can pay to use the MTR, buses, mini-buses and at many shops in Hong Kong) and put them in plush toys, and after she got the short-term patents sued Octopus Card Limited for patent infringement. Read the case here in Chinese.

Professor Alice Lee, HKU
Photo: Danny Friedmann

The Octopus Card case was mentioned in the April 19, 2010 Environmental Systems Product Holdings Inc. v DPC Technology Ltd., case HCMP1465/2008. And the Windsurfing test (Windsurfing International Inc. v Tabur Marine (Great Britain) Ltd [1985] RPC 59 (at 73) was mentioned to see whether the patent is obvious or not. In the same Environmental Systems Product Holding case, the counsel for the applicant, Mr Felix Pao, "described the short-term patent application system under Part XV of the PO as an “honour system” as it depends heavily on the integrity and honesty of an applicant in that an applicant would not make any application in respect of a claimed invention known to be not patentable for whatever reasons." The Recorder Rimsky Yuen, SC in Chambers, Court of First Instance, High Court, agreed. 

Professor Lee questioned who is going to pay for the abuse? Her question is very relevant. The strength of the short-term patent (not expensive and easily granted) might be its weakness as well. Therefore it might be considered to increase the fee to get a short-term patent, so that bad faith applicants will be deterred, or use a part of the fee to compensate the abused party in the legal costs.

Then moderator Haochen Sun introduced Mr Mayank Vaid, IP Director, Louis Vuitton, Hong Kong, as the IP director of the most popular luxury brand. Mr Vaid's presentation was called "Corporate Decision Making in IPR Protection and Enforcement"

Mr Vaid is responsible for protecting the intellectual property rights of LVMH Fashion Group, which includes iconic brands such as LV, Marc Jacobs, LOEWE, CELINE, KENZO, Emilio Pucci and Berluti. Therefore, the company has made the IP perspective part of its overall business strategy. Mr Vaid said that from a commercial sense IP is crucial to guarantee the customer experience. LV's promise of exclusivity is per definition incompatible with counterfeit goods, that confuse customers and dilute the distinctiveness of the brand, and damage its reputation. Therefore Louis Vuitton takes full control over its production process (no production is done in Asia) and supply chain (no distribution to Hong Kong via the internet) to protect its brand value very seriously. Louis Vuitton has now around 80 stores in Asia, excluding China and Japan.

Mr Vaid explains that a transformation has taken place in the economy, from one that was based for 80 percent on the value of goods and services and for 20 percent on the value of the underlying intellectual property rights, to an economy where this ratio has been reversed.

Bernard Arnault, CEO of LVMH, and Yves Carcelle, CEO of Louis Vuitton stand in Louis Vuitton's tradition of proactively and assertively protecting and enforcing the IP of its brands. This tradition dates from 1908 when LV fought its first IP battle. Louis Vuitton has a zero-tolerance policy against counterfeiters, (which IP Dragon thinks, deserves emulation). Why do not more companies protect and enforce their intellectual property rights as assertive as Louis Vuitton? According to Mr Vaid, some might take the view that marketing is more important, or some might be afraid to annoy the local government, or they have not reserved enough budget to enforce their intellectual property rights.

Mr Vaid summed up product categories in which Louis Vuitton is not active, but where people use the trademarked logo unauthorisedly: fake nails, rikshaws, tiles, a Romanian LV themed restaurant, bedsheets, iPhone caps, and condoms, see here. Especially in Korea one can find bags with similar monograms, such as LX, LJ etc, which leads to confusion and/or dilute the trademark, and Louis Vuitton is tirelessly filing lawsuits against those manufacturers, distributors and sellers.

It is getting increasingly more challenging for LV to protect and enforce its intellectual property rights, since the reaction time of the counterfeiters is getting faster. It takes LV about halve a year to launch a new product (from design, production and distribution to sales). Before, the counterfeiters needed to send someone to a fashion show in Paris or Milan, but now they only have to watch the fashion shows via Facebook and three months later one can find counterfeit designs in places such as Dubai. The challenge to fight counterfeiters is not just for companies such as Louis Vuitton, but for society in general: since counterfeiting has been linked to organized crime, child labour, degradation of the environment, violation of safety laws, money laundering, etc.

Louis Vuitton has not only a reputation thanks to its exclusive products, but also because of its proactive intellectual property protection and enforcement. It is well known that Louis Vuitton did not only trademark the name Louis Vuitton, and the monogram LV but also the Monogram Canvas, and each of its constituting parts: the fourpointed stars, four-pointed stars inset in curved diamonds (flower quatrefoil diamond), and four-pointed flowers inset (flower quatrefoil). These marks are enforced too, read here. Read Paul-Gerard Pasol's Evolution of the Monogram Design here. In City Chain Stores (S) Pte, Ltd. vs Louis Vuitton Malletier, the Court of Appeal of Singapore overturned the trial court which enjoined City Chain Stores of using Louis Vuitton's flower quatrefoil, and flower quatrefoil diamond designs, because it deemed that City Chain Stores used the designs in a random pattern and non-uniform way and therefore not in a origin-related use but for embellishment and decorative purposes. Although sections 27(1) and (2) of the Singapore Trade Marks Act (1998) are based on article 5 (1) a-b, EU Trade Marks Directive (Directive 89/104/EEC, December 21, 1988), the Court of Appeal chose to interpret the requirement of trademark use stricter than the European interpretation (which is to look whether the defendant's use is liable to affect the functions of the trademark). Reason was that the answer by the European Court of Justice (Arsenal Football Club plc vs Matthew Reed) on whether non-origin-related use could constitute trademark infringement, was considered uncertain and controversial by UK professors Lionel Bently and Brad Sherman. Also, the Max Planck Study on the Overall Functioning of the European Trade Mark System of February 2011, stated that current European Court of Justice jurisprudence on the issue was "neither consistent nor satisfactory" (see paragraph 2.178 here). However, the anti-dilution provision of section 53 (3) (b) seems to be able to protect the communication, investment and advertising functions of a trademark. Read Ng-Loy Wee Loon's article about it here.

Louis Vuitton is using some innovative ways to prevent counterfeiting and new protection and enforcement routes. These include pioneering landlord liability (read Joseph Simone's article for WIPO Magazine here and Daniel Plane's Law Journal of INTA article here), cooperating with Thai monks to raise the awareness that trademark infringement is a sin, and is looking whether the principles of Sharia law can be construed in a way to provide support for such a protection, see here.

Mr Mayank Vaid, IP Director, Louis Vuitton, Hong Kong
Photo: Danny Friedmann

Peter Cheung, director Intellectual Property Department HKSAR Government, asked Mr Vaid about the Chewy Vuiton case (Louis Vuitton Malletier S.A., Plaintiff, v. Haute Diggity Dog, LLC, Victoria D.N. Dauernheim, and Woofies, LLC, Defendants. 464 F.Supp. 2d 495, US District Court For The Eastern District Of Virginia, Alexandria Division, November 3, 2006, uploaded by Susan Scafidi of Counterfeit Chic here, and the appellate decision of Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 4th Cir. November 13, 2007, Ms Scafidi uploaded here).

The district court did not apply the statutory factors for dilution, and simply reasoned that because Haute Diggity Dog’s product was a parody it meant that "there can be no association with the famous mark as a matter of law." The 4th Circuit recognises that a claim of parody does not preclude liability for dilution. But by checking the statutory factors for dilution the 4th Circuit came to the same solution. However, IP Dragon agrees with appellant Louis Vuitton Malletier and the Amicus International Trademark Association (INTA). To use a name such as Chewy Vuiton in combination with the monogram of the letters C and V constitutes dilution by blurring. Dogs chewing on products that are purposively been associated with Louis Vuitton brand, can be seen as tarnishing to a luxury brand. The same can be said if a vulgar snack bar is purposively associating itself in the mind of the public with a 5 start hotel chain via a similar sign as the mark. The similarity between the sign and the mark is not controversial to both courts: "similarity is an essential part of a parody, as the similar marks and trade dress must "convey two simultaneous-and contradictory-messages: that it is the original, but also that it is not the original and is instead a parody."" The 4th Circuit stated: "The satire is unmistakable. The dog toy is a comment on the rich and famous, on the Louis Vuitton name and related marks, and on conspicuous consumption in general." This statement is subjective. Even if it really is parody, it can be argued that Haute Diggity Dog rides on the coat tail of a famous brand and misappropriates Louis Vuitton's substantial investments in labour, skill, effort and capital.
Hong Kong does not have a parody exception in its Trade Marks Ordinance. If they would have such a provision, it would be in Chapter 559, Section 19 'Exceptions to infringements', see here.

Louis Vuitton filed a lawsuit for trademark dilution, false designation of origin and unfair competition against Warner Brothers over the use of a fake LV bag in the movie The Hangover 2, and wants that all DVDs will be pulled. Watchful Louis Vuitton employees found out that the bag used in the movie was made by Diophy, a company that Louis Vuitton is suing, see here.

Over the years Louis Vuitton has organized art exhibitions and supported many artists as a kind of modern maecenas. Mr Vaid is clear about when Louis Vuitton will file lawsuits: when one of its trademarks is used for commercial exploitation. The trademarked logo LV has been abused by a Belgian "artist" in a not so kosher nor halal way: he tattooed pigs with the LV trademark without the permission of Louis Vuitton, and then killed them and sold their skins. Besides the blatant trademark infringement, the lack of animal welfare caused a controversy. The tattooed pigs were banned from the Shanghai Art Fair in 2008, see here.

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"Rethinking IP" Round Table HKU - Drake University

Knowles Building, at HKU
Photo: Danny Friedmann

Last Saturday morning, lawyers, academics and students from Hong Kong, Macau, Singapore, Australia, Japan and the U.S., all passionate about intellectual property rights, gathered at the University of Hong Kong for a round table discussion on intellectual property and policy. It was organised by the Law & Technology Centre of the University of Hong Kong (HKU) and the Intellectual Property Law Center at Drake University Law School located in Des Moines, Iowa. The 10th floor of the Knowles building with its great wooden concentric structure accommodated the participants for this purpose.

The programme consisted of four panel presentations (will be separate blog postings) that urge us to rethink:
Panel I: IP Protection in Hong kong;
Panel II: IP Protection in the Digital Age;
Panel III: IP Protection in Mainland China;
Panel IV: IP Protection globally.

After the opening remarks by professor Douglas Arner, head of the Department of Law of HKU, who welcomed everybody and told that Law & Technology Centre of HKU has already existed for a decade.

Professor Douglas Arner, head of Department of Law, HKU
Photo: Danny Friedmann

The opening speech was given by Peter Cheung, director of the Intellectual Property Department (IPD) of the HKSAR government. 

Left professor Peter K. Yu, Drake University and the right Peter Cheung, director IPD, HKSAR Government
Photo: Danny Friedmann

"Trading Intellectual Property in Hong Kong"   

Mr Cheung recalled that he was invited by the Motion Picture Association of America (MPAA) to come to Hollywood. There, he familiarised himself with the Three-Act Structure, which is a success formula to make a blockbuster movie. But, as Mr Cheung explained, it can be applied to reach his goal, namely to use IP trade to drive stakeholders' economic development. In Act I the context is given, Act II the challenge, and Act III the resolution. I am sure that the Hong Kong movie scene uses a similar scheme to keep the audiences captivated. Those Chinese from the Mainland, versed in Marxism, might recall the different acts as Hegel's thesis, anti-thesis, synthesis, respectively. So if Act I is the setting whereby Hong Kong is introduced as a Special Administrative Region with the ambition to become a regional knowledge hub, Act II is the challenge of how to get there? In other words, how to apply IP, how to monetise these intangible assets? Mr Cheung was inspired by a Japanese car manufacturer who was not interested in cars, but in the money that you can make with cars. This same approach should be followed with IP. (IP Dragon wonders whether it is really possible to exploit IP, without really loving it?). MBAs teach you many interesting things but not about the role of intangibles, Mr Cheung said. Therefore, we need to map out our niche, and make an inventory of what is already available, predict change, seize opportunity and collaborate to innovate, and execute these processes in parallel. Because, we live in an IP economy, Mr Cheung told. The significance becomes clear when one looks at the most valuable brand in the world: Coca-Cola (71,861 million U.S. dollar, according to Interbrand in October 2011). If all tangibles are destroyed, Coca-Cola could resurrect itself because of the worth of its intangibles. IP can be lucrative, even though it is sometimes tiny. For example Mr Cheung knows the composer of the two second jingles.
If one accepts that one person in a million goes to the best university and has the change to become really  innovative, then Mainland China wins (with 1,340 people), Europe will be in second place (833 person ) and the US (312 person) third place. Hong Kong gets only 8 of these talented people. Hong Kong should become a platform where demand and supply come together. According to Mr Cheung Hong Kong can bring together IP owners that want to sell some of their IP, via IP intermediaries (for this Hong Kong needs officials, professionals, scientists and financiers) so that investors can buy IP. Now only goods and services are traded. There should be transformation to IP.
Hong Kong can have a first-mover advantage in IP trade. Hong Kong has a rule of law, attractive tax system, with a bilingual work force, and is not a gate-to-China, but is part of China. Hong Kong has to take the initiative and make it blaze its own trail. Shenzhen already has a trade platform, but just a website and they seem not very active, they do not have an international nor a holistic approach to the trade platform. China each province has its own platform. In Hong Kong there are more professionals.
The HKSAR government seems to have a lot of attention to niches such as Islamic banking. In the audience there was some concern about whether Mr Cheung is getting enough support from the government. Mr Cheung is well positioned to convince the HKSAR government for his case.

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Golden Combination: Chow Tai Fook and Disney

"You can't stay in your corner of the Forest waiting for others to come to you. You have to go to them sometimes," said Winnie the Pooh.

Winnie the Pooh: "All this gold makes me crave for ... honey."
Exhibition at Yitian Holiday Plaza,
Windows of the World, Shenzhen
Photo Danny Friedmann

Now Winnie is talking the talk and walking the walk, since Disney joined forces with Hong Kong jewelry chain store Chow Tai Fook Jewellery Group Ltd., that just was listed to the Hang Seng Stock Exchange (and as of today is part of the Hong Kong Global Composite Index and Hong Kong Composite Index, see here). 

Chow Tai Fook raised 2 billion U.S. dollars in its Initial Public Offering to get enough funds to realise its plan to expand its points of sale in China, Hong Kong and Macau to 2,000 stores by 2016. Now, Chow Tai Fook has around 1,500 stores, mostly in China. In Macau it has about 80 stores. Chow Tai Fook also has stores in Taiwan, Singapore and Malaysia. 

Chow Tai Fook was awarded Disney's product licence, see here, to take advantage from the recognition of Disney's  iconic bear (which, according to girls and even grown up women has a high "cuteness" factor) and combine it with the jewelry retail expertise of Chow Tai Fook in China, Hong Kong and Macau.

Do you consider to engage in co-branding and you want to know more information about the legal implications, contact ipdragon at gmail.

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Hong Kong's Original Grant Patent, Reciprocity And Hong Kong's Future As Legal Hub

On the last day one can send his or her opinion on the patent registration system in Hong Kong to the government, you will find an overview of what we can expect and what we can hope for. The patent system of Hong Kong, largely influenced by the re-registration patent system it inherited as a dependent territory of the United Kingdom, will be history soon. The Hong Kong government acknowledges that there is room for improvement. Reading the consultation paper makes clear that it is safe to say that Hong Kong will take this opportunity to set up a full fledged patent system, which will include original grant patent (OGP) and that the possibility to re-register existent patents of SIPO, UKPO and EPO will be maintained or extended. 


In this article:

• I will first give a view of the old system;
• followed by the expected new system;
• then this author will make a case for reciprocity; namely that patents granted by Hong Kong will be mutually recognised, and thus re-registrable by China, the UK and the other members of the European Patent Convention. 
• Hong Kong's new patent system could be an important building block to realise the position of legal hub for inter-Chinese and Sino-International commercial conflicts.

The Old System
Before June 27, 1997, Hong Kong re-registered and enforced patents obtained in the United Kingdom (UKPO) and the European Patent Office (EPO) designating the United Kingdom. After the sovereignty change on July 1, 1997 Hong Kong started to re-register patents obtained in China (SIPO) next to patents obtained at UKPO and the EPO designating the United Kingdom. Hong Kong has accepted patents from SIPO, UKPO, EPO, but because Hong Kong does not grant any standard patents on its own there could be no reciprocity in this respect, so far.

Currently, you can get two kinds of Hong Kong patents:
- Standard patent. You can apply for a standard patent if you have already a patent granted by SIPO, UKPO or EPO, within six months of publication of a patent application in one of the before-mentioned designating patent offices (POs). The Hong Kong's Registrar needs to record the application and publish the request to record in the Hong Kong's Gazette. After both the publication of the request to record the application and the patent was granted in one of the before-mentioned POs, the request for registration of the designated patent and grant of a Hong Kong standard patent can be filed. Then, the Hong Kong Registrar will register the designated patent, grant a Hong Kong standard patent, issue a certificate of the Hong Kong standard patent and publish the specification in the Hong Kong's Gazette. Hong Kong's standard patent has a term of 20 years.
Please note that the substantive examination (novel=not belonging to the prior art, non-obvious and useful)  is not done in Hong Kong but in one of the before-mentioned designating POs.
- Short-term patent. There are two routes to apply for a Hong Kong short-term patent.
If you have done an international application or via one of the designating POs for a utility model patent designating China, once that application entered its national phase you have six months to apply for a Hong Kong short-term patent. If you use these route you can use the search report of the international application.
The other route is to file the application with a specification with a description, one or more claims but only one independent claim, an abstract and a search report (prior art search by prescribed searching authority; Austria, Australia, Japan, Russia, Sweden, U.S. and EPO) to Hong Kong Registrar. The Hong Kong Registrar is only going to do a formal but no substantive examination.
A Hong Kong short-term patent has a term of 8 years. If you want more information on the current patent system in Hong Kong, I recommend you to read Professors Michael Pendleton and Alice Lee's authoritative book called 'Intellectual Property in Hong Kong' (published 2008 by LexisNexis).

New System
October 4, 2011, the Hong Kong government invited the public and stakeholders to give their view (until December 31, 2011) on how Hong Kong's patent system can be improved. See the consultation paper here. Three questions were posed:

• 1A. Should Hong Kong be able to grant its own patents (OGP)? 1B If so should Hong Kong outsource search and substantive examination? IC. If Hong Kong gets OGP, whether it should still re-register patents granted by other POs, and if so which POs? 
• 2. What should happen to the short-term patent? 
• 3. Should the profession of patent agents be regulated?

Questions 2 and 3 are easier to answered:

2. Hong Kong's short-term patent should be more aligned with China's utility-patent and the EPO's  and conform this patent the term should be extended to 10 years.

3. The lower the barriers to enter this profession the better. The market is well-equipped to come up with some self-regulation.

1A It is important for Hong Kong as a regional innovation and technology hub that Hong Kong can grant its own patents. This will improve the investment climate for R&D activities. Now companies and universities that want to protect their inventions have to first get a patent from SIPO or UKPO or EPO before they can get a patent to protect and enforce their patents in Hong Kong.


1B The consultation paper is less neutral than one would expect. "For an economy like Hong Kong where the size of the local market is a relatively small part of the global market, going straight to route (a) in paragraph 1.45 above [i.e. in-house substantive examination] is probably out of the question, as it may well result in disproportionately high registration fees up-front." According to the writers of the consultation paper, which are the Commerce and Economic Development Bureau and Intellectual Property Department, it is more viable that on the short to medium term the substantive examination is outsourced (just as in Macao and Singapore) and on the long term, when Hong Kong has gained expertise is this area, to do the substantive examination. I agree with that. Hong Kong will not get any expertise if they do not start. Hong Kong should establish a HKPO and sent some of the HKPO employees to other Patent Offices around the world, to get experience and recruit some experienced Patent Office people from other countries. Search and substantive examination could not only be done in Hong Kong for the HKPO, but for other POs as well. If Denmark, with a population of only 5.5 million can do that for Singapore, then Hong Kong might be able to do it for other countries, if they got some expertise in this field. If Hong Kong is doing in-house search and substantive examination, a whole knowledge intensive industry will be created, which includes professionals that can establish and search databases for the state of the art in all kinds of technologies, and draft, examine and grant patents. In such a climate more R&D would flourish.

1C Next to the possibility of getting an OGP, the re-registration route of patents from SIPO, UKPO or EPO should continue to be possible. However, this possibility of re-registration should be based on the principle of reciprocity. So if other POs are willing to re-register Hong Kong's OGP then Hong Kong will be willing to re-register the patents they granted.

Reciprocity
The willingness of other countries to accept patent's granted by Hong Kong depends on the quality of Hong Kong's patents but foremost on politics. Since Hong Kong has re-registered patents from SIPO, UKPO and EPO without any reciprocity. Therefore Hong Kong seems to be in an excellent situation to start with these POs to strike deals. Now the good news is that there have been discussions between the Mainland and Hong Kong during the 16th Working Meeting of the Hong Kong/Guangdong Co-operation Joint Conference held February 28, 2011 in Guangzhou, see here. Possibilities of fostering mutual recognition of patent system between the two places under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA). It is thought that "if the Mainland enterprises could apply for internationally recognized standard patents for the products in Hong Kong, it would help them tap the overseas market, thus creating huge business opportunities for the patent industry in Hong Kong.

Legal hub
For Hong Kong the Mainland is the opportunity and threat. When the Renminbi will be convertible somewhere in the future (expected within 5 to 10 years), Hong Kong's position as a financial hub will be outflanked by Shanghai. Hong Kong aspires to become a regional innovation and technology hub. I think Hong Kong is well positioned here. But there are many Mainland cities, such as sistercity Shenzhen, that compete for the same kind of position in the region or a little further away but a formidable competitor: Singapore. But Hong Kong is much nearer the Mainland than Singapore, and Hong Kong has something the Mainland does not have yet. A lot of experience with the rule of law. This is Hong Kong's biggest asset, potentially much more valuable then trading reclaimed land. The rule of law is a crucial condition for sustained economic growth (read professor Randall Peerenboom's paper about it here). For economic growth innovation is a necessity. And innovation is harnessed by patents. In other words: patents can be important for economic growth. And Hong Kong's rule of law creates the right precondition for a effective patent system.
Another strength of Hong Kong is that it is still a trait-d'union between China and the rest of the world. The great universities of Hong Kong prepare skilled professionals that speak English, Chinese and Cantonese.  All litigation in Hong Kong can be done in either English or Chinese. This makes it the natural place to bring legal cases, which include Chinese and overseas businesses. Hong Kong could become a legal hub, for litigation, arbitration and mediation where Mainland, Hong Kong and international businesses can solve their legal conflicts.



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Shenzhen Intellectual Property Index Starts Before Hong Kong's

Race has only just begun, everything is still possible...

Congratulations to Shenzhen with its own IP Index. There is a fierce competition going on between Asian cities to become the IP hub of Asia. And have your own IP index is conducive to attain this goal. For Hong Kong, with its peculiar patent system, read here, the competition seems difficult, but who knows, the race has just started.

Read Anita Lam's SCMP article here. Hat tip to Ron Yu.

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Independent Creation Valid Defense Against Copyright Infringement

Jonathan Mak, design student at Hong Kong Polytechnic University School of Design said that he did not rip-off the idea for the Apple tribute in which you can distinguish the silhouette of the late Apple co-founder Steve Jobs.

Invisible Gold in Asia Facebook Page (set up by author of the book with the same name Professor David Llewelyn) explains that both parties (or theoretically even more parties) can come up with the same copyrighted work: "Although that will be harder to prove so make sure you keep records."

If you can prove that you created the work independently, you can use it as a valid defense against copyright infringement.

See Jonathan Mak's design here.

The design of UK designer known as Raid71 here.

In this YouTube video the voice-over says that Jonathan Mak "has been offered copyright offers". Well, if Mak is the creator he automatically has the copyright of the work, at the moment of creation. What the voice-over probably means is that he got offers to assign his copyright. 

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Should Hong Kong (Also) Get Its Own "Normal" Patent System?

Hong Kong's patent system spinning...
Whirlpool in middle of flag, a suitable symbol 

So far Hong Kong's patent system has been mainly a re-registration system of Chinese patents, United Kingdom patents or European patents. Yesterday, October 4, 2011, the Hong Kong government issued a consultation paper, about whether this should change.

• Should Hong Kong be able to originally grant its own standard (20 years) patents? In that case should re-registration of Chinese, United Kingdom or European patents possible? If so, should other jurisdictions be included?
• Should short-term (8  years) patents be retained as a supplement to standard patents? How can the system be improved.
• The regulation of patent agency services is another subject about which you can give your opinion.

You give the Hong Kong government feedback on or before December 31, 2011. 

Thanks Ron Yu for pointing me to the consultation paper.

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Looking into the Back Mirror: "If I Were For Real"

If I were for real, is a 1981 Taiwanese movie (including Hong Kong teams) that was censored in Hong Kong when it was still a British crown colony, because it was deemed too critical about the privileged life of the happy few of party officials.

Li Hsiao-chang (played by Alan Tam) tries to face the challenges in his life with ingenuity. And he has to, since he made his girl friend pregnant. In fact the movie is a kind of Chinese version of the Being There (1971), Jerzy Kosinski's masterpiece. Interestingly, the melody of "Like a virgin", played by an organ you can hear at end of part I and beginning of part II. Billy Steinberg and Tom Kelly composed the song in 1983, which launched Madonna's career. Maybe this music has been put under the video later.

To placate his future father in law he wants to buy a bottle of Mao Tai wine 茅台酒. But he cannot afford the needed twelve "dollar" fifty.

The liquor sales man said sarcastically:
"Just what I thought. That is what Nixon drank. Prime Minister Tanaka too. It's not for you."

Then Li ask what the cooking wine costs. Answer: "One twenty."
 "I can afford that. Now an empty bottle of Mao Tai, a red candle."
The liquor sales man nods and gives a sardonic smile.
Later you see Li putting the cooking wine into the empty Mao Tai bottle.

Here is Part II: In the beginning you can hear the melody of "Like a virgin" and fast forwarding to minute 3 you can watch the liquor scene.

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Taiwan Shining Intellectual Property Blueprint For China Or Wishful Thinking?

What works for Taiwan, 
does (not)
necessarily works for China,
and vice versa.

During the press conference for the "Piracy Out, Competitiveness Up" campaign in Taipei (Taiwan) the chief secretary of the Ministry of Economic Affairs, Hung Shu-min said that Taiwan could be a model worth modelling for China in regard to bringing down business software piracy levels. Read Stacey Wu and Deborah Kuo's article for Focus Taiwan here.

In the Eighth Annual BSA Global Piracy Study (released last May, 2011) Taiwan scored third best in Asia. Taiwan's business software piracy rate 37 percent (2010), four percentage points lower than in 2006. Only Japan scored better (20 percent) and Singapore (34 percent) in 2010. Taiwan scored better than Hong Kong (45 percent). Taiwan's relative low piracy has probably enhanced foreign investments in research and development. China still has still a serious business computer piracy issue 78 percent in 2010.

However, between 2006 and 2010 China also reduced its business software piracy rate with four percentage points (from 82 percent in 2006 to 78 percent in 2010). So relatively China reduced business software piracy as much as Taiwan.

China's Three Experimental Gardens
But I agree that the People's Republic of China is in a unique situation where it has the opportunity to look at  a variety of Chinese communities with very different systems, and pick and choose the best from each system. I am sure Beijing is already keeping a good eye on Hong Kong, Macau and Taiwan.

The question is whether the measures that worked in Taiwan will work on the Mainland too. To name one huge difference: size. If your territory is not as humongous as China's, like Taiwan's modest size (or much smaller Singapore) each problem is easier to fix. On the island of Taiwan the local and national nearly coincide. One can argue that in China all problems are getting aggravated because the tension between the local and national interests. Taiwan's legal system, and policy is very different from that of China. But learning from each other's successes and mistakes seems a good way to make a shortcut to progress.

Do you think China can emulate Taiwan's anti-piracy system? Or do you think each system is well tuned to its unique situation and to transplant a different legal system and policies are not recommended?

Ronald Yu, lecturer University of Hong Kong wrote on personal title, via email:
"I remember that when I first went to Taiwan you could buy lots of fake goods - fake shoes, pirated recordings, etc. but it has since cleaned up a lot. I have thought, for some time, that Taiwan could act as a barometer for China's future, and if my assumption holds, perhaps China shall soon have a very clean, effective IP regime."

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8th Asia-Pacific IP Forum in Hong Kong

Thursday 29 September, the eight Asia-Pacific IP Forum will be held at the Kowloon Shangri-La in Hong Kong. It is a fully packed day organised by Managing Intellectual Property magazine, free for in-house counsels.

The following speakers will talk about the following subjects:

• Chew Kherk Ying, partner, Wong & Partners, Malaysia, Celeste Ang, partner, Baker & McKenzie,Wong & Leow, Singapore, Adolf Panggabean, partner, Hadiputranto, Hadinoto & Partners, Indonesia will speak about enforceability and enforcement strategies in Southeast Asia.
• Then Joe Thymian, director sales & marketing – Asia Pacific, Melbourne IT Digital Brand Services will unveil the secrets of the new gTLDs – risks and opportunities for your brand.
• Elliot Papageorgiou, partner, Rouse, He Fang, partner, Rouse and Oliver Lutze, head of IPR, Bayer (China) Limited will navigate the changing patent litigation scene in China.
• Ada Leung from the Hong Kong Intellectual Property Department and Albert Ho from Hong Kong Customs will give the key note speeches. 
• Anuradha Salhotra, managing partner, Lall Lahiri & Salhotra and Doyel Sengupta, partner, Lall Lahiri & Salhotra will initiate you into the wondrous world of criminal and civil enforcement strategies in India.
• And last but not least Benjamin Choi, partner, Mayer Brown JSM will explain how to maximise your trade mark portfolio.

More information about the event and updates you can find here.

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Open Letter to the UN Special Rapporteur: Nothing Wrong With Graduated Response

Dear Mr Frank La Rue,

With interest I have read your report (May 16, 2011) for the Human Rights Council on the promotion and protection of the right to freedom of opinion and expression, and the concern you have for the graduated response. I was unpleasantly surprised by the uncritical reception of the document in the media. Why an open letter on IP Dragon? This blog is dedicated to intellectual property in the People's Republic of China. The Hong Kong Special Administrative Region, which is part of China, but has its own legislation, just rejected the graduated response in its Copyright (Amended) Bill 2011. Therefore I take this opportunity to respond to your sincere but unnecessary concerns about the graduated response in relation to human rights, so that it does not give ammunition to people less charmed by the graduated response on the wrong grounds.

In your report you refer to yourself in Paragraph 49: "[H]e is alarmed by proposals to disconnect users from Internet access if they violate intellectual property rights. This also includes legislation based on the concept of “graduated response”, which imposes a series of penalties on copyright infringers that could lead to suspension of Internet service, such as the so-called “three strikes-law” in France34 and the Digital Economy Act 2010 of the United Kingdom.35"
34 Decision 2009-580, Act furthering the diffusion and protection of creation on the Internet, (original: Loi favorisant la diffusion et la protection de la création sur internet), Conseil Constitutionnel, 10 June 2010. Available from: http://www.conseil-constitutionnel.fr/conseilconstitutionnel/root/bank_mm/anglais/2009_580dc.pdf.
35 Digital Economy Act 2010, sections 3-16.

The graduated response is a generic term for a batch of measures that can work as a deterrent and as an effective countermeasure against peer-to-peer (P2P) file-sharing that infringes copyrighted works. In his paper The Graduated Response Peter Yu included the following non-exhaustive catalogue of actions: suspension and termination of service, capping of bandwidth, blocking of sites, portals and protocols. As you give the examples of the "three strikes-law" in France and the UK, I will focus on these first.

France
On May 12, 2009 the French National Assembly (parliament) passed the Act furthering the diffusion and protection of creation on the Internet requiring internet service providers to undertake a "graduated response" in case internet users illegally exchange copyrighted material without prior agreement from the copyright holders. Or to be more precise: article L336-3 Intellectual Property Code: "A person who has subscribed to internet access to online public communication services is under a duty to ensure that said access is not used for reproducing, showing, making available or communicating to the public works or property protected by copyright or a related right without the authorization of the copyright holders provided for in Books I and II when such authorization is required".

A day later also the Senate voted in favour of the Act. However, on May 19, 2009, some members of the National Assembly contested the constitutionality of the bill and referred it to the Constitutional Council for review. On June 10, 2009, the Constitutional Council held that the bill was partly unconstitutional, read here (English). It said that it violated the Declaration of the Rights of Man and of the Citizen (1789) and the presumption of innocence, separation of powers and freedom of speech. The bill was revised and approved by the Constitutional Council on October 22, 2009.

In paragraph 38 the Constitutional Council wrote in their review of June 10, 2009: "When enabling copyright holders or holders of related rights, together with persons authorised to represent the same for the defence of their rights, to petition the Tribunal de grande instance to order, after a full hearing of all parties, the taking of measures necessary to prevent or put an end to such infringement of their rights, Parliament has not failed to respect freedom of expression and communication. It will be incumbent upon the court called upon to hear such petitions to order solely those measures strictly necessary to preserve the rights involved. Subject to this qualification, section 10 is not unconstitutional." 

So the biggest revision was that Haute Autorité pour la diffusion des œuvres et la protection des droits sur internet (HADOPI), the independent administrative authority that should administer the Act furthering the diffusion and protection of creation on the Internet, needed to do a judicial review before revoking a person's internet access. The implementation of the Act furthering the diffusion and protection of creation on the Internet went not smooth, but to build an institution such as HADOPI costs time. I agree with the French Constitutional Council that there is nothing fundamentally wrong with the revised bill.

Rights and duties
My question to you Mr La Rue is why are you "alarmed" by proposals to disconnect users from internet access if they violate intellectual property rights. I am sure you have not forgotten that property rights are human rights too, article 17 Universal Declaration of Human Rights. Do copyright holders have the right to stop people infringe their rights online? This indeed is a rhetorical question. Nobody would be "alarmed" if someone who has copied complete books of the library and distributed the copies to all his friends was warned twice by his library and when he is caught the third time, that his library card will be revoked directly after a judicial review. And nobody would be concerned if such a person, after being warned twice and given a judicial review, will have no access to any library in the country for a certain period of time.
There are human rights, but these are coupled to human duties. In fact, all internet service providers already let their clients sign a contract in which they agree with the duty to not infringe copyrights and which clarifies possible consequences, including disconnecting access.

You focus only on the copyright infringers' right to freedom of opinion and expression. From a moral point of view one can argue that if they value this human right they should also value other people's human rights including to enjoy its property. Copyright infringers infringe precisely because they might be too creatively challenged to have any opinion and expression of their own. However this does not justify to safeguard them from effective copyright enforcement. What can be justified, but is oftentimes neglected, is that when copyrights are infringed the right to freedom of expression and opinion of professional creators or people who invest in creative products is undermined. If you do not support effective measures such as a graduated response that can protect creative efforts via copyright you take away the very oxygen of creativity.

UK
The 2010 Digital Economy Act also introduces a graduated response. The internet service providers have an obligation to notify subscribers of reported infringements (article 124A). There is the obligation to keep infringement lists to the copyright holders (article 124B). And there are obligations to limit internet access (articles 124 G and 124 H). However as these articles demonstrate the Secretary of State needs to elaborate on measures that limit internet access, followed by approval by the parliament.

Other countries
The graduated response mechanism in South Korea is different from the French and UK version. Here the Ministry of Culture, Sports and Tourism can hand down an order to suspend internet access. But it affects only the account the infringer has with a particular online service provider. So the infringer can switch, making the measure significantly less effective. Before the Ministry can order the disconnection, an examination by the internal committee of the Korea Copyright Commission and a hearing of the online service provider will take place. See Major Amendments to Korean Copyright Act, April 2009. Similar graduate response mechanisms one can find in Taiwan, New Zealand and Chile.

Quid pro quo
The US, Australia, Singapore and since the Copyright (Amendment) Bill 2010 also in Hong Kong, there is a quid pro quo for online service providers. If the online service providers in these countries apply a kind of anti-piracy measures they will be offered a statutory limitation of liability. However in Hong Kong, the online service providers get the safe harbour even without having to implement measures to disconnect copyright infringers. In short: they get a safe harbour without graduated response. They only have to implement "notice to notice" (sending of the notice to the claimed infringer on the receipt of a notice from the copyright holder) and "notice and takedown" (taking down or disabling access to the claimed infringing materials on the receipt of a notice from the copyright holder). Read Connie Carnabuci of Freshfield Bruckhaus Deringer's article 'Strengthening protection of digital copyright in Hong Kong' from January 2010 about it here.

Hong Kong does not address non-hosted piracy caused by peer-to-peer (P2P) exchange of copyrighted material without prior permission of the copyright holder, as IFPI points out. "Meaningful measures at the network level, as well as a ‘graduated response’procedure for dealing with repeat infringement, could reduce P2P piracy and provide effective deterrence. They could also reduce the need to bring litigation to stop online infringement." Read the comments of May Seey Leong, Benjamin Ng and Gadi Oron of IFPI here.

Promising survey
According to a survey (1,000 internet users) conducted by the Hong Kong Transition Project of the Hong Kong Baptist University between October 17 and 19, 2009, and sponsored by the International Federation Against Copyright Theft – Greater China (IFACT-GC), 60 percent of the surveyed internet users in Hong Kong admitted to illegally download content. The good news, however, was that:

• 57.1% of the respondents were supportive of the implementation of a graduated response programme in Hong Kong;
• 81.8% of the respondents said they would likely stop or may stop after the implementation a graduated response programme in Hong Kong. 

So this sounds promising. Read more about the survey here.

I am looking forward to your next report in which I hope to read about human rights which include property, and that the other side of rights are also mentioned "duties", and last but not least: that creators right to freedom of expression and opinions is linked to an effective copyright enforcement, the oxygen of creativity.

Yours sincerely,


Danny Friedmann

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Cyber attacks: "Biggest Transfer of IP in History" Points To China

After eating a rat, one should stay vigilant.
Photo: Tan Fugui

Computer security company McAfee discovered that during a 5 year time span 72 organisation were infiltrated via the internet. Jim Finkle reports for Reuters about what Dmitri Alperovitch, McAfee Lab's vice president of Threat Research calls "the biggest transfer of wealth in terms of intellectual property in history." Read Finkle's article here

Victims of the attacks were between 2006 and 2011:

• USA 49 times
• Canada 4 times
• South Korea 3 times
• Taiwan 3 times
• Japan 2 times
• Switzerland 2 times
• UK 2 times
• Indonesia 2 time
• Vietnam 1 time
• Denmark 1 time
• Singapore 1 time
• Hong Kong 1 time
• Germany 1 time
• India 1 time

Also many international organisations were targeted, including the International Olymic Committee, the World Anti-Doping Agency; and an array of companies, from defense contractors to high-tech enterprises, the computers of the United Nations and the Association of Southeast Asian Nations.

Because of the character of the cyber attacks a state actor is suspected. Mr [James] Lewis, cyber expert with the Center for Strategic and International Studies, was quoted saying: "Everything points to China." read Mr Lewis' report Cybersecurity Two Years Later January 2011. China is one of only countries in the world that enough knowledge in the field of cyber attacks to pull this off. And China is one of the countries that did not fell victim to this RAT (Remote Access Tool) attack.

Read McAfee's White Paper: 'Revealed Operation Shady RAT' (pdf, 14 pages).

UPDATE August 3, 2011:
Also normal citizens are victims of Chinese cyberattacks. Robert Lee of the Korea Herald reports that 35 million social security numbers of Korean civilians float in Chinese cyberspace, because of hacking attacks, read here.

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When You Give This Horse Wings It's Still Brand Dilution

It's a car ..., it's a plane ...
Picture: Danny Friedmann

... it's a piano.
 Times Square, Causeway Bay, Hong Kong
Picture: Danny Friedmann

The Pegasus Guoqin costs more than 2.86 million Renminbi (over US $410,000). Although it is painted in the "Ferrari rosso" (rosso corsa) colour, has a horse on top (although with wings, just like Pegasus), you will not find Ferrari "horse power" inside, instead a Schimmel piano. If Ferrari registered the famous red colour (if it gained a secondary meaning) it could have, in combination with the horse figure cause confusion with the public about whether Ferrari endorsed the product. Then again Ferrari trademarked the signs in the trademark classes for cars, not pianos. Therefore, in the case that Ferrari is not competing with pianos and in the absence of a likelihood of confusion, the real question is: Does it dilute Ferrari's world famous brand by blurring? 

The piano is on offer in Hong Kong. Does Hong Kong's jurisdiction have anti-dilution laws?

Article 18 (4) Trademarks Ordinance 2003: A person infringes a registered trade mark if-

(a) he uses in the course of trade or business a sign which is identical or similar to the trade mark in relation to goods or services which are not identical or similar to those for which the trade mark is registered;

(b) the trade mark is entitled to protection under the Paris Convention as a well-known trade mark; and
(c) the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.

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Trademark Logo Goes Up in Smoke To Save Australians? Let's Check The HK-Australian Bilateral Investment Treaty

How to warn people
against blindness who
 cannot do not want to see?

Cigarette manufacturer Philip Morris was not amused when Australia announced last November 2010 that it would prohibit brand logos on cigarette packets, to prevent exposure to children that might be lured to the flames of eternal damnation. Smoking kills 15,000 deaths in Australia each year.

According to the BBC: "Health Secretary Andrew Lansley said "glitzy designs on packets" attracted children to smoking and it made sense to look at "less attractive packaging". Read here. As you can see the substitute for the
brand logo is less than attractive, unless you are a masochist. So "plain packaging law" as the Australian law is described is quite a euphemism.

The proposed ban would be implemented in 2012, and made the cigarette manufacturers worry that this would jeopardise their financial health. 

Philip Morris Brands: Marlboro, Virginia Slims, Merit, Parliament, Benson & Hedges, L&M, Chesterfield, Lark, Cambridge, Basic


If a cigarette manufacturer such as Philip Morris can no longer use their trademarked logos on its cigarette packets (including the heraldry with the slogan "veni-vidi-vice", which is Ceasar's phrase meaning I came, I saw and I conquered) it becomes more difficult to distinguish its brand of cigarettes from other brands of cigarettes. The personality of the brand, the carefully cultivated associations with the brand, will partly go up in smoke. Then again all Philip Morris' competitors deal with the same problem. Cigarette manufacturers such as Philip Morris and British Tobaccco, that have advertised for decades to gain name recognition and brand associations will probably lose relatively more market share than more generic brands.

But can Australia really prohibit the use of trademarked logos and only allow the trademarked brand name on a packet full of warnings?

According to a BBC article, Philip Morris Asia, based in Hong Kong, is now considering a case against Australia for violating the Bilateral Investment 'Agreement between the Governments of Hong Kong and Australia for the Promotion and Protection of Investments' signed in 1993, see here. 

Intellectual property rights falls, according to article 1 (e) iv of the Bilateral Investment Treaty, within the scope of the definition of investment ("intellectual property rights including rights with respect to copyright, patents, trademarks, trade names, industrial designs, trade secrets, know-how and goodwill").

The first sentence of article 6 (1) of the Bilateral Investment Treaty is: "Investors of either Contracting Party shall not be deprived of their investments nor subjected to measures having effect equivalent to such deprivation in the area of the other Contracting Party except under due process of law, for a public purpose related to the internal needs of that Party, on a non-discriminatory basis, and against compensation."

This means that Australia cannot subject an investor in Hong Kong to "measures having effect equivalent to such deprivation", such as the prohibition of the use of a trademarked logo on cigarette packets, except for a public purpose related to the internal needs of Australia. To prevent 15,000 people in Australia each year from dying caused by smoking I think falls within this definition. So the exception can only kick-in in case there is a public purpose, check, and compensation for the expropriation of the use of the logo.

Claimant = company       respondent = state

Bilateral Investment Treaties can be a vehicle for companies to get a binding tribunal judgement against a non-compliant state via for example the Arbitration Rules of the United Nations Commission on International Trade Law. In case a company wanted to change a law or regulation in a state that is not in compliance to the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs), it could lobby its government to bring the case to the Dispute Settlement panel of the World Trade Organization, (which was done collectively by the copyright industries for example in case of DS 362) which is a less direct and less efficient route for a company to take. 

Interested in Bilateral Investment Treaties?

This time I wrote about Bilateral Investment Treaties because it touches upon the protection of intellectual property rights and Hong Kong. At the Chinese University of Hong Kong there are, however two experts in this field who deal with the subject in a broader sense. Professor Bryan Mercurio, Chinese University of Hong Kong (CUHK) has written extensively about the subject. For example two books: 'Bilateral and Regional Trade Agreements: Commentary and Analysis' (Cambridge University Press, 2009)(edited with Simon Lester) 'Bilateral and Regional Trade Agreements: Case Studies' (Cambridge University Press, 2009)(edited with Simon Lester). This year the following book chapter will be published about a particularly fascinating region: Bilateral and Regional Trade Agreements in Asia: A Sceptic’s View’ in Ross Buckley, Richard Hu and Douglas Arner (eds), The Economic and Financial Integration of East Asia (Edward Elgar, forthcoming 2011). See more of Professor Mercurio's publications here.

Another expert is Professor Julien Chaisse (CUHK), who specialises in Foreign Direct Investments, and therefore also writes about Bilateral Investment Treaties: 'Do bilateral investment treaties increase foreign direct investment flows - Revisiting the role of legal parameters in economic empirical research’ as co-investigator with Prof. Christian Bellak (Forschungsprojekt ‘Vielfalt von Bilateralen Investitionsverträgen‘), supported by the Vienna University of Business and Economics (WU) & Arbeitskammer Vienna (Austria) (March 2010-March 2012). See more of Professor Chaisse's publications here.

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Induced Patent Infringement Standard: How To Avoid Proving Intent And Fast Forward To Actual Knowledge

Q:"How do you want your induced patent infringement?"
A:"Willful blind, not deepfried"

Spicy vegetarian deep-fried noodle nest
Source: Veggy Monkey Eats

The U.S. Supreme Court decided Global-Tech versus SEB May 31, 2011. It gives a standard for induced patent infringement: namely willful blindness, that goes beyond recklessness and negligence.

The facts are interesting too for IP Dragon:
"Pentalpha is a Hong Kong maker of home appliances and a wholly owned subsidiary of petitioner Global-Tech Ap­pliances, Inc. In order to develop a deep fryer for Sunbeam, Pentalpha purchased an SEB fryer in Hong Kong and copied all but its cosmetic features. Because the SEB fryer bought in Hong Kong was made for sale in a foreign market, it bore no U.S. patent markings. After copying SEB’s design, Pentalpha retained an attorney to conduct a right-to-use study, but Pentalpha refrained from telling the attorney that its design was copied directly from SEB’s."

So what can be learned from these bare facts? A way for patent holders to avoid this problem of proving intent and fast forward proving actual knowledge is to use the patent numbers of the patents you own in different jurisdictions on your products. Maybe a sticker is suboptimal, because removable. Engraved in or stamped on the metal or plastic could do the trick.

Now back to the case. It was about which intent test to use in case of 35 U.S.C. §271(b): "Whoever actively induces infringement of a patent shall be liable as an infringer."

The Federal Circuit had used the deliberate indifference test.
The Supreme Court opines that the deliberate indifference test makes it possible that knowledge is found where there is just a known risk that the induced acts are infringing. Instead the Supreme Court (8 minus 1) think that some active effort by the inducer is needed to avoid knowing about the infringing nature of the activities.

In this humble author's opinion the wording "actively induces" does not correspond to "deliberate indifference", which seems a mental state. So in this respect he agrees with the outcome of the Supreme Court's decision.

What is the willful blindness test exactly:
(1) the defendant must subjectively believe that there is a high probability that a fact exists;
(2) the defendant must take deliberate actions to avoid learning of that fact.

There seems to be a continuum from no knowledge to recklessness/negligence to deliberate indifference to willful blindness to actual knowledge.

Read the Supreme Court decision here.

Eileen McDermott, whose coverage of the court deliberations is excellent, is quoting Global-Tech's counsel William Dunnegan who was proposing to use a "purposeful, culpability test". This was followed by John Roberts C.J. question of how to apply such a standard across different industries. McDermott points out that in some amici briefs it became clear that for example the semiconductor industry has 420,000 patents. McDermott quoted the reaction of John Roberts C.J. after Dunnegan said that there might be different standards per industry: "Well we're not going to adopt a special rule for the deep-fryer industry." Read McDermott's court report for Managing IP here.

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