Charitable work and a dispute about a smile



In a recent judgment, the Hong Kong High Court decided whether, in the absence of a formal agreement, goodwill accrued in a trade mark can be attributed to both the brand owner and its local licensee.

In this case, the plaintiff was a non-profit  institution founded in 1982, incorporated in 1987, by a renowned American surgeon. The purpose of this institution was to provide medical treatment for children born with a cleft palate or lip defect in poorer regions lacking infrastructure and with low surgeon/patient ratios.

The plaintiff had been the owner of the “OPERATION SMILE” trade mark in Hong Kong since 1998 of which there were two variants shown below:

In addition to these registered trade marks, the plaintiff proved its goodwill by leading numerous charitable activities including numerous healthcare examinations and charity-funded surgeries performed on children born with facial deformities.

The situation changed when the plaintiff led a successful medical mission to Mainland China in May 1991. The mission was partly funded by donations from the public in Hong Kong and got good media coverage there.  The operation was advertised as “Operation Smile’s China Medical Mission” and an appropriate Chinese translation consisting of four Chinese characters “微笑行動” was created. The Chinese translation was subsequently adopted by the defendant in this case as the dominant part of its trade marks.

The defendant was incorporated in 1992 as “Operation Smile – China Medical Mission Limited” and operated as the local partner of the plaintiff. What’s more, its founding members were the major donors of the plaintiff’s medical mission in China.

It should be noted that the 1991 mission took place prior to the incorporation of the defendant and laid the foundation for the plaintiff’s goodwill which is widely recognised today in Hong Kong and Mainland China.  The term “Medical Mission” has been regularly featured in the plaintiff’s work on an international basis both as a general term and as a precise title.  Accordingly, it became part of the defendant’s title when it was incorporated.

The situation remained unchanged until 2014, when the defendant refused to enter into a formal licensing agreement with the plaintiff.  The plaintiff gave notice to the defendant setting out the plaintiff’s position as owner of the intellectual property rights in its name, trade marks and registrations.  The plaintiff reminded the defendant that the licences and consents, which it had previously granted were terminated, and called upon it to “cease and desist” from using any of the plaintiff’s intellectual property.

Although the defendant changed its name and registered the new name Beam International Foundation Limited in 2015, it persisted in using the plaintiff’s name as a prelude to its own domain and website.

The plaintiff then commenced proceedings against the defendant in the Hong Kong High Court for trade marks infringement and passing off and sought summary judgment.

The Court granted the application and held that:

  1. The defendant was under the aegis of the plaintiff, i.e. the defendant was using the plaintiff’s trade marks in Hong Kong and China with its consent.  They were considered the same organisation and acted as such.
  2. The defendant was nothing more than the ‘alter ego’ of the plaintiff, enjoying the plaintiff’s goodwill, name and trade marks.  However, the defendant was also trying to establish a separate identity independent from the plaintiff’s.
  3. The defendant was unable to establish that the plaintiff’s goodwill had been extinguished. Its post-termination acts misrepresent the relationship ‌as the two parties are no longer associated.  The defendant had no right to continue to use the plaintiff’s name after the licence has been revoked.  This has effectively been conceded by the change in the name registered. Furthermore, the defendant cannot establish that the mark or trade name had ceased to be distinctive of the licensor.

There is no defence available to the defendant in this matter especially since it has admitted using the plaintiff’s trade marks after termination of the licence.  The defendant has also admitted the use of the plaintiff’s name in a shortened form (“operationsmile” and “opsmile”) for the domain names for its website. The Court found that this was a blatant attempt to infringe the plaintiff’s intellectual property rights.  

Additionally, the defendant made two applications to register trade marks that are unarguably infringing the plaintiff’s trade marks.

The first one, in English and Chinese, has been rejected:

The second one, in Chinese characters with a form of logo containing again the four offending Chinese characters,

has been opposed.

The Judge also held that the similarity to the plaintiff’s trade marks, and in some respects, the identical reproduction of the plaintiff’s trade marks registered in Hong Kong, are likely to confuse the public.

They could even attract donations and sponsorship to the defendant, which is now unrelated to the plaintiff, whereas these donations were actually meant to be received by the original foundation in pursuit of its charitable objectives.

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