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Bad faith in trade mark opposition … ad infinitum?

10 Aug 2020

Bad faith as a ground of refusal

In Hong Kong, it is almost routine for opponents in trade mark opposition cases to accuse the applicant of bad faith. Such allegations are sometimes based on nothing more than a perceived similarity between an earlier mark and the sign in question. A recent decision of the Trade Marks Registry, however, underlines the importance of discipline and fairness in this area.

The Trade Marks Ordinance, Cap 559, came into force in 2003. Following the UK legislation (Trade Marks Act 1994), it introduced the concept of bad faith on the part of the applicant as an absolute ground of refusal (section 11(5)(b)). The term “bad faith” is not defined in the Ordinance. According to the case law, it includes dishonesty, and also some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area being examined. The subjective element of the test means that the tribunal must ascertain what the defendant knew about the transaction or other matters in question. It must then be decided whether in the light of that knowledge, the applicant’s conduct is dishonest judged by ordinary standards of honest people, the applicant’s own standards of honesty being irrelevant to the determination of the objective element. See 深圳市德力康電子科技有限公司 v LG Corporation & Anor, HCMP 881/2013, 26 March 2014.

The above interpretation of the expression stems largely from the definition adopted by the courts for “dishonesty” in other areas of the law, such as the criminal law. While judicial interpretation has evolved (and is continuing to evolve) over the last ten or twenty years, a constant theme is that a charge of “bad faith” or “dishonesty” is one of the most serious and damning allegations in law. It is therefore not surprising that strict rules of pleading and evidence have developed in relation to the making and proof of such allegations in civil courts of law.

How “bad faith” is pleaded: theory and practice

On the other hand, undeniably, the Trade Marks Registry is not a court of law. Its procedure is governed by the subsidiary legislation, in particular, the Trade Marks Rules, Cap 559A. Obviously in proceedings before the Registry, the Rules of the High Court have no direct application. The Trade Marks Rules however do not expressly govern how an allegation of bad faith should be pleaded or proved. Those Rules do provide for the filing of mandatory documents such as a notice (grounds) of opposition and a counter-statement. In practice those documents function as pleadings in Registry proceedings. Nevertheless, there is no procedure corresponding to requests for further and better particulars or striking out obviously unsustainable averments such as that available in the Court of First Instance. Furthermore, unlike in court proceedings, cross-examination is an exception rather than the norm in contested Registry proceedings.

As is commonly observed, this state of affairs has sadly led to a relatively lax and undisciplined attitude towards pleadings in Registry proceedings. Another reason for this might be the fact that the time for filing a notice of opposition is fairly limited (three months after publication), whereas the evidence is filed by the parties over a much longer period of time, typically the subsequent 21 months. In most cases, trade mark agents are not able or ready to craft a well-considered or detailed notice of opposition (or counter-statement) before they possess all the evidence. This has led to the common practice mentioned at the outset, namely, the widespread use of more or less a boiler-plate pleading when the time comes to file a notice of opposition. Among other things, the boiler-plate almost always includes an allegation of bad faith, often without particulars or any meaningful attempt at elaboration.

Such laxity may not be a big problem when the tribunal is faced with run-of-the-mill objections such as risk of confusion with an earlier mark, registered or unregistered, provided that the prior mark (and the relevant goods and services) is identified with accuracy. However when one is dealing with an accusation of bad faith, the respondent (i.e. applicant) is clearly entitled to know the charge he has to meet, and the precise factual basis for asserting such a sinister state of mind. Such a fundamental requirement or safeguard of procedural fairness should apply, regardless of whether one is in a court of law or other legal tribunal.

The case of Infinitus TM

Coming to the decision under discussion, at the hearing of the opposition, counsel for the opponent invoked a loosely pleaded allegation of bad faith. He submitted, first of all, that because the opponent had an earlier mark which bore some resemblance with the mark in issue, there must have been an attempt by the applicant to confuse or mislead the public. He further argued that the Chairman of the applicant was a businessman in Malaysia, where the opponent was also active. Finally, he urged that the applicant had intended to block the opponent from marketing a new line of product or service in Hong Kong.  None of these arguments was spelt out in the notice of opposition.

As the hearing officer (Ms Winnie WH Ng) observed, “An allegation of bad faith is a serious allegation which must be distinctly alleged and which should not be made unless it can be properly pleaded.” Furthermore, she rightly held that such an allegation must be “distinctly proved and cogent evidence is required”. At the invitation of the applicant (represented by DVC’s CW Ling), she declined to entertain the three arguments raised in the opponent’s submission.  Consequently she dismissed the objection of bad faith entirely.

Key takeaways

As the Registrar correctly reminded us, an allegation of bad faith should never be lightly made. Practitioners should think twice before throwing in such a plea as a matter of course, even under the pressure of time. Even if this had to be done for whatever reason, there would come a time when the opponent or its adviser should pause and review the allegation in light of all the evidence filed, and critically assess whether it could properly be maintained. They should also consider, at the earliest available opportunity, whether any particulars should be given or supplemented. As we have seen, a failure to heed this fundamental advice may lead to the objection being thrown out before it is even entertained by the tribunal. Such an omission would also substantially increase the time and costs of opposition proceedings.