Pro View Hong Kong Decision

8/3/2019 Pro View Hong Kong Decision

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A HCA739/2010 AB IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGIONCOURT OF FmST INSTANCE

ACTION NO. 739 OF 2010

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E BETWEEN EF APPLE INC. 1st Plaintiff FG IP APPLICATION DEVELOPMENT Lllv1ITED 2

ndPlaintiff G

H and HI I

JPROVIEW INTERNATIONAL HOLDINGS LIl\I1ITED 1st Defendant('*Ja 00 ~~ J!lJN~ ~~0 j) J

K PROVIEW ELECTRONICS CO. LTD 2nd Defendant(Plfrt J = g - T " IN{7}~~~0 'j)

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MPROVIEW TECHNOLOGY (SHENZHEN) CO., LTD 3rd Defendant( Pl% t f4 :f i C ~ # JI) :ff~ ~ 0 'j) M

N YANG LONG-SAN, ROWELL C m ~ W ) 4th DefendantYOKE TECHNOLOGY (SHENZHEN) CO. LTD 5th Defendant(p1 tTa ; J I t : g ~ ~ ~ Cl*#J ! )~~~0 'j)

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Q Before: Hon Poon J in ChambersDate of Hearing : 28 June 2011Date of Decision: 28 June 2011Date of Reasons for Decision: 14 July 2011

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B REASONS FOR DECISION Bc cD

1. This is an application for interlocutory injunctions, which Iallowed on 28 June 2011. These are the reasons for my decision. D

E E2 . The background leading to these proceedings may be

F summarized as follows. FG GA. BACKGROUNDH HA.I. ThepartiesI I3. Apple, a US company established in January 1977, is a worldJ renowned leader in the business of designing, manufacturing and marketing

of a wide variety of innovative products including computers, iPod mediaplayers, iPhones and iPads. IP Application, an English companyincorporated in August 2009, is a special purpose company set up and usedby Apple to acquire trademarks related to the name "iPad". They are theplaintiffs in these proceedings.

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N N4 . The defendants come from the Proview Group. The Proviewo o

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Group is a producer of display devices. Its major products include LCDmonitors, CRT monitors and flat-panel digital products. Ithas operationsand offices around the world, including Taiwan, Mainland China(Shenzhen and Wuhan), Hong Kong and Europe. Its holding company isProview Holdings, which was incorporated in Bermuda and is listed on theHong Kong Stock Exchange.

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5. Yang Long San, Rowell ("Yang"), a Taiwanese, is the founderB- B

cof the Proview Group. He was at all material times the chairman andchief executive officer of Proview Holdings until he was adjudicated cbankrupt on 2 August 2010. Other companies of the Proview Group that

D Dfeature in these proceedings are Proview Electronics, a Taiwan company,E Proview Shenzhen and Yoke Technology, both being Shenzhen companies.

Yang was at all material times the responsible person and director ofProview Electronics. He was also the legal representative, generalmanager and chairman of both Proview Shenzhen and Yoke Technologyand remains so despite his bankruptcy.

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I A.2. The disputes IJ 6. In January 20 I0, Apple announced its new tablet computer J

branded "iPad". It was first launched on the US market on 3 April 2010K K

and then in other places around the world one month later. It has sinceL become much sought after worldwide. As at June 2010, over 1 million

units had already been sold in the US market alone. Its success isL

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7. In preparation for the launch of iPads, Apple causedo o

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investigations to be conducted throughout the world to identify registeredtrademarks associated with the name "iPad" with a view to acquiring them.As Mr Paul Schmidt of Messrs Baker & Mackenzie ("B&M'), solicitorsfor Apple and IP Application explained in his second affidavit:

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s"17. .. . Apple>s products are highly sought after by consumers

throughout the world and the launch of every new productby Apple is eagerly awaited and the subject of much mediacoverage. Accordingly, in the lead up to the launch of anew product, Apple faces the dual challenges of maintainingthe confidentiality of the product (including its features and

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the name or trade mark under which it will be marketed)and ensuring that upon its launch, the product can bemarketed under the name or trade mark selected for it.The latter challenge is met, inter alia, by Apple securing allrequisite trade mark registrations worldwide prior to theannouncement and launch of the new product. However,in order to maintain confidentiality and the anonymity ofApple, this is done through special purpose companiesincorporated for the purpose for securing such requisitetrade mark registrations. Based on my 16 years'experience as a lawyer, and in particular, 7 years ofexperience as a trade marks lawyer, it is my experience thatthis practice of using special purpose vehicles to securetrade mark registrations in order to preserve the anonymityof a well known company and the confidentiality of itsplans to launch a new product is a common practicethroughout the world, and especially in mainland China.

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H18. Accordingly, in 2009, Apple carried out investigations intothe use of trade marks associated with the name 'iPad' via

its lawyers and agents ... in preparation for the proposedannouncement and launch of its iPad branded device inearly 2010."

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K8. The investigations revealed that Proview Group ownedtrademark registrations in eight countries or territories ("the SubjectTrademarks") including two trademark registrations in the Mainland,Registrations Nos. 1590557 and 1682310 ("the China Trademarks").Negotiations between an agent engaged by Apple and IP Application andProview Group's representatives then took place between August andDecember 2009. Eventually, IP Application and Proview Holdings,Proview Electronics and Proview Shenzhen ("the Contracting Defendants")entered into a written agreement in December 2009 whereby theContracting Defendants agreed to sell, transfer and assign the SubjectTrademarks to IP Application for 35,000 ("the Agreement").

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s9 . It is Apple and IP Application's case that in the process ofdrawing up the formal written agreement ("the Written Agreement") and T

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the assignments ("the Country Assignments") to give effect to theAgreement, the representatives of the Contracting Defendants representedand led IP Application to believe that all the Subject Trademarks, includingin particular the China Trademarks, were owned by and registered in thename of Pro view Electronics. Accordingly, the Written Agreement andthe Country Assignments executed on 23 December 2009 expressly statedthat Proview Electronics was the proprietor of the Subject Trademarksincluding the China Trademarks and that Proview Electronics warrantedthat it was the unencumbered sole owner of the Subject Trademarksincluding the China Trademarks. The Country Assignment pertaining tothe China Trademarks ("the China Country Assignment") also recited thatProview Electronics was the proprietor of the China Trademarks.However, after Apple had announced the launch ofiPads in January 2010,it was discovered that the China Trademarks were in fact registered in thename of Pro view Shenzhen. The China Country Assignment wasaccordingly ineffective inassigning the China Trademarks to IP Application.

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10. Apple and IPApplication further complained that while Macknowledging that a mistake had been made in the China CountryAssignment, the Contracting Defendants refused to rectify the mistake andsuggested that Apple should pay US$l million to purchase the ChinaTrademarks.

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11. On 24 March 2010, Apple and IP Application, through B&M, Qissued a letter to the Contracting Defendants demanding them to transferthe China Trademarks to them. The Contracting Defendants refused to do Rso. s

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B. APPLICATIONS FOR INTERIM INJUNCTIVE RELIEFB B

B.l. Events leading to the applicationsc c12. Since early April 2010, there had been intermittent reports in

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the media suggesting that the Proview Group, in particular ProviewHoldings and Proview Shenzhen were about to sell or dispose of the ChinaTrademarks. When pressed by B&M, Proview Holdings and ProviewShenzhen gave an undertaking on 9 April 2010 not to sell the ChinaTrademarks before 30 April 2010. On 29 Apri12010, Proview Shenzhen,through its solicitors, gave a further undertaking not to sell or otherwisedispose of the China Trademarks until 31 May 2010 in order to facilitatefurther discussions for a commercial resolution of the dispute.

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13. Despite the second undertaking, press reports about thepossibility of Proview Holdings and Proview Shenzhen selling the ChinaTrademarks continued to surface. In response to B&M' s demands,Proview Shenzhen, through its solicitors, reiterated on 12 May 2010 that ithad no intention of selling or otherwise disposing the China Trademarksuntil 31 May 2010.

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14. In the meantime, the fact that the Proview Group was infinancial difficulties began to emerge. In fact, on 12 May 2010, the HongKong Stock Exchange issued a notice that trading of Proview Holdings'shares had been suspended. Legal proceedings had been instituted againstProview Holdings, ProviewShenzhen and Yang in the Mainland seekingrecovery of substantial assets. More pertinently, B&M found out thatChina Minsheng Banking Corporation had obtained an asset preservationorder C'APO") against Proview Shenzhen and that such asset preservation

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order had since March 2010 been registered with the Mainland Trade MarkOffice ("TMO") over the China Trademarks. B

c15. Apple and IP Application immediately commenced the

Dpresent action on 20 May 2010.E

16. On 24 May 2010, they instituted proceedings against ProviewShenzhen in the Shenzhen Intermediate People's Court and filed anapplication for APO in respect of the China Trademarks. The applicationwas granted on 12 June 2010 but subject to the APOs obtained by someother Mainland banks.

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17. Further searches revealed that contrary to its undertakings,Proview Shenzhen had in fact lodged applications with the TMO to transferthe China Trademarks to Yoke Technology on 7 May 2010.

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B.2.18.

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On 2 June 2010, Apple and IP Application applied, ex parte, Mfor interim injunctive relief against Proview Holdings, Proview Shenzhen,Yang and Yoke Teclmology essentially to preserve the China Trademarks.Deputy Judge Carlson allowed the application.

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19. On 3 June 2010, Apple and IP Application took out thepresent inter parte summons ("the Summons"), which was returned for thefirst hearing before Sakhrani J on 11 June 2010.

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20. Proview Shenzhen and Yoke Technology were then absent.B B

cSakhrani J granted the interim relief sought against them until trial orfurther order. c

D D21. Proview Holdings and Yang were legally represented. After

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hearing arguments, Sakhrani J ordered that until the determination of theSummons, Proview Holdings be restrained from dealing in or with theChina Trademarks and Yang be restrained from procuring, assisting orauthorizing Proview Holdings, Proview Shenzhen and/or Yoke Technologyto dea1 in the China Trademarks. His Lordship then gave directions forfiling of evidence and adjourned the Summons for substantive hearing.

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C . THE PRESENT HEARINGJ J22. The substantive hearing then came before me.

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L 23. Yang purported to file an affirmation for and on behalf of LM

himself and Proview Holdings on 30 July 2010. That affirmation wasaffirmed outside Hong Kong before a solicitor of Hong Kong. It is clearlyinadmissible: see Top Flying Investment Ltd v Open Mission Assets Ltd[2006] 4 HKLRD 83, per Recorder McCoy, SC at paragraphs 30-32.B&M pointed out the deficiency to Yang's solicitors but no attempt hadbeen made to rectify the defect. Effectively, neither Proview Holdingsnor Yang has placed any evidence before me.

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R 24. As noted, Yang was adjudicated bankrupt on 2 August 2010. Rs Apple and IP Application had obtained leave to proceed against him on10November 2010. sT Tu uv v


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25. By letter dated 20 June 2011, Proview Holdings, through itsB B

csolicitors, indicated that it would not object to the orders sought against itinsofar as they relate to it. c

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E26. What remains for my determination is the outstandingapplication against Yang. He is now acting in person. He did not appearat the hearing.

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G D. DISCUSSION GH D.l. The applicable principles H

27. They have become well established since American CyanamidCo. v Ethicon Ltd [1975] AC 396. In brief, the plaintiffmust show that:

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(1) there isa serious question to be tried in respect of the claim;K K

L(2) the plaintiff will suffer irreparable damage if no injunction isgranted; L

M (3) the defendant will not suffer irreparable damage if theinjunction is granted; and MN (4) if (b) and (c) are not conclusive, on a proper consideration of

the balance of convenience or balance of justice, an injunctionshall be granted.

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D.2. A serious question to be triedR R

28. The causes of action that Apple and IP Application rely on ares as follows. sT T

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D.2.a. Breach of the Agreement by the Contracting DefendantsB B

29. There is clearly a serious question to be tried that theContracting Defendants have acted in breach of the Agreement in that theyc c

D had wrongfully refused to honour their obligation to assign the ChinaTrademarks to IPApplication.

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F D.2.b. Unlawfol means conspiracy F30. In a claim of conspiracy, the plaintiff must prove thefollowing elements:

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(1) a combination or agreement between two or more individuals;I I

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(2) an intent to injure;(3) pursuant to which combination or agreement and with that

intention certain acts were carried out;J

K(4) resulting in loss and damage to the plaintiff.

L LSee Bullen & Leake & Jacob's Precedents of Pleadings 15th Edn, Vol. 2, atparagraph 50-01.1.M M

N N31. A combination to effect a breach of contract is an actionableo conspiracy, A party to the conspiracy can liable even ifhe is not a partyto the contract and even where it was not possible to establish that he hadprocured any breach of it, but where he had merely combined, with acommon design, together with the parties committing the breach. SeeClerk &Lindsell on Torts 20th Edn, at paragraph 24-103.

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s 32. A company, being a separate legal person, can conspire withits directors; and the knowledge of the company may be found in a director

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who has management or control for the transaction or act in question. SeeClerk &Lindsell on Torts z o " Edn, at paragraph 24-93; Belmont FinanceCorporation v Williams Furniture Ltd and others (No.2) [1980] 1AllER393.

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33. Here, the conduct of all the defendants demonstrate that they Ehave combined together with the common intention of injuring Apple andIP Application by acting in breach of the Agreement. Proview Holdings,Proview Electronics and Proview Shenzhen, all clearly under Yang'scontrol, have refused to take any steps to ensure compliance with theAgreement so that the China Trademarks are properly assigned ortransferred to IPApplication. Instead, they attempted to exploit thesituation as a business opportunity for the Proview Group by seeking anamount ofUS$10,000,000 from Apple.

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34. Yoke Technology inferentially participated in the conspiracyLby acting as the transferee of the China Trademarks under the reported

transfer applications referred to in paragraph 17 above. MN35. Yang's participation in the conspiracy can be inferred from

among other things, the following matters : o(1) as the chairman and chief executive officer of Proview

Holdings and the responsible person and director of ProviewElectronics and as the legal representative, general managerand chairman of both Proview Shenzhen and Yoke Technology,he had at the material time management and control over them;and

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B (2) he had knowledge of the Agreement entered into by the partiesin December 2009. Bc cD 36. Itis plain that the defendants had the necessary intent to injure

Apple and IP Application and their conduct will cause damage to them.D

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F 37. Accordingly, I am satisfied that there is clearly a serious Fquestion to be tried for the claim of conspiracy.G G

D.2.c. The China Trademarks held an trustH H38. A contract for valuable consideration to transfer a subject

I Imatter passes a beneficial interest by way of property in that subject matter

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if the contract is one of which a court of equity will decree specificperformance and the vendor becomes in equity a trustee for the purchaserof the subject matter. See Palmer v Carey [1926] AC 703, at pp.706-707;Lewin on Trusts 18th Edn, at paragraphs 10-03 to 10-10.

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39. In performing of the Agreement, IP Application had paid35,000 for the Subject Trade Marks (including the China Trademarks) on23 December 2009. It is plainly arguable that the circumstances of thepresent case are such that the court may order specific performance ifIP Application succeeds in its claim for breach of contract. There isaccordingly clearly a serious question to be tried that Proview Shenzhennow holds the China Trademarks on trust for Apple and IP Application.

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s D.2.d. Breach a/trust and dishonest assistance s40. The general requirements of liability for dishonest assistance

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B (a) there exists a trust;(b) to which there is a breach of trust by the trustee of that trust;(c) that the defendant induces or assists that breach of trust; and(d) the defendant does so dishonestly ..

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E See Lewin on Trusts, 18th Edn, at paragraphs 40-09, 40-14, 40-15, 40-17to 40-19, 40-21 to 40-23; Royal Brunei Airlines SDN. BHD. v Philip TanKok Ming [1995] 2 AC 378, at pp.384D-385D, 386G-391D, 392F-H.

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H 41. There is clearly a serious question to be tried that each of these Hrequirements are made out in the present case:

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J(a) there exists a trust by reason of the matters set out in

Part D.2.c above; JK (b) Proview Shenzhen has acted in breach of trust by reason of its

refusal to transfer and assign the China Trademarks;K

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M(c) other defendants have induced andlor assisted in Proview

Shenzhen's breach; and MN (d) such inducement andlor assistance is dishonest. No D.3. Irreparable damage to Apple and IP Application op 42. Apple has launched and marketed its iPads worldwide, pQ including, in particular, in Mainland China. It is accordingly important

that it is able to secure and obtain the China Trademarks. Itcan do soonly if the China Trademarks are not disposed of by the defendantspending the determination of the present case. If the defendants are notrestrained and are able to dispose of the China Trademarks, they willclearly suffer irreparable damage.

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D.4. No irreparable damage to the defendantsB

43. On the other hand, there will be no damage or harm caused todefendants if they are restrained from not disposing of the China Trademarkspending the resolution of the dispute between the parties.

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D.5. Balance of convenience E

44. It is well established that one important factor in the balance Fof convenience is preservation of the status quo. The grant of theinjunctions sought against the defendants will serve to preserve the statusquo pending trial without causing any real loss or damage to the defendants.But as noted, if no interim injunctions are in place, and the defendants areat liberty to dispose of the China Trademarks before trial, Apple andIP Application will suffer irreparable damage, even if they succeed at theend of the day. The balance of convenience is clearly weighed heavily infavour of granting the relief sought.

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E. CONCLUSION M45. For the above reasons, I made an order in terms ofparagraphs 1, 2, 3 and 4.2 of the Summons insofar as they relate to ProviewHoldings and Yang: see Appendix.

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(J. Poon)Judge of the Court of First InstanceHigh CourtsT

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Mr John M.Y. Yan, SC leading Mr Dominic W.H. Pun, instructed byMessrs Baker &McKenzie, for the PlaintiffsMr Harry Liu, instructed by Messrs Michael Li & Co.,for the 1st DefendantThe 4th Defendant, in person, absent

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AppendixB B

C l. Paragraphs 2, 3 and 4 of the Order of Deputy High Court Judge cCarlson dated 2 June 2010 be continued until after the trial of thisD action or until further order. DE E

2. The 1st , 3rd and/or 5t h Defendants and each of them whether acting byF themselves, their directors, officers, legal representatives, servants or FG agents or any of them be restrained from making any oral or written G

representation to any person( s) to the effect that they are, or anyoneH of them is, the proprietor(s) and/or owner(s) of the IPAD trade mark HI (Registration No. 1590557, registered in Class 9 of the Register of I

Trade Marks of the People's Republic of China) and the IPADJ Stylised trade mark (Registration No. 1682310, registered in Class 9 JK of the Register of Trade Marks of the People's Republic of China) K

(hereafter the "Subject Trademarks") and/or have any title, rightsL and/or interests inthe Subject Trademarks, and/or is in a position to LM sell, transfer, assign, otherwise dispose of and/or give good title to M

the Subject Trademarks.N N

0 3. The 4 th Defendant whether acting by himself, his servants or agents 0or any of them or otherwise howsoever be restrained from procuringp or authorizing the 1st , 3rd and/or s"Defendants to make any oral or p

Q written representation to any person(s) to the effect that they are, or Qanyone of them is, the proprietor(s) and/or owner(s) of the Subject

R RTrademarks and/or have any title, rights and/or interests in thes Subject Trademarks, and/or is in a position to sell, transfer, assign, s

otherwise dispose of and/or give good title to the SubjectT TTrademarks.u u

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4 . An order that :B

4.1 c4 .2 the 1st and 4 th Defendants do within 3 days of the personal

service upon them of the order to be made hereunder take allsteps necessary to procure the withdrawal of the TransferApplications (as defined in paragraph 4.1) by the 3rd and5th Defendants.

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Pro View Hong Kong Decision