Hong Kong Update: “Honest Practices” in the Defence of Comparative Advertising

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PCCW-HKT Datacom Services Limited & Ors v Hong Kong Broadband Network Limited [2018] HKCFI 2037 (5 September 2018)

Summary

The High Court held that Hong Kong Broadband Network Limited (“HKBN”) was able to rely on the honest practices defence under s.21 of the Trade Marks Ordinance (Cap. 559) (“TMO”).

It is the first time that the High Court has explored the application of “honest practices” in the defence of comparative advertising under the TMO.

Background

PCCW-HKT Datacom Services Limited (“PCCW”) is a listed telecommunications company which was incorporated in Hong Kong in 1979. It owns a number of registrations, including “HKT”, “eye” and “PCCW”, in relation to telecommunications services.

HKBN is a listed telecommunications company which was incorporated in Hong Kong in 1999.

HKBN had used PCCW marks in its promotional materials which contain straplines or catchphrases such as:

  • PCCW Home Telephhone Service customers say goodbye to bloated monthly fees!
  • PCCW Home Telephone and eye Communications Service customers Say goodbye to bloated monthly fees

Defence of comparative advertising

PCCW sued HKBN for trade mark infringement under s.18(1) and 18(4) of the TMO.

To determine whether HKBN can rely on the defence of comparative advertising, the Court had to consider:

  1. What use was made in the trade mark sense; and
  2. Whether the use of the mark was in accordance with honest practices.

PCCW alleged that HKBN’s use of the PCCW marks in its advertisements was a “use in the course of trade for trade mark purpose”, which constitutes an infringement under s.(18)(1) of the TMO. PCCW argued that:

  1. HKBN used the PCCW marks in promotional materials. S.(18)(5) of the TMO states that a person uses a sign if the sign is used for advertising purposes, which was the case for HKBN’s promotional materials; and
  2. HKBN’s use constituted use of a trade mark to denote origin as it referred to PCCW in its promotional materials and compared both services.

Was HKBN’s use in accordance with honest practices?

S.21(2) of the TMO sets out three requirements for “honest practices”:

  1. Whether the use takes unfair advantage of the trade mark;
  2. Whether the use is detrimental to the distinctive character or repute of the trade mark; or
  3. Whether the use is such as to deceive the public.

The Court held that HKBN was honest practices in the defence of comparative advertising to trade mark infringement on the basis that:

  1. The average consumer will not take the statements seriously as sensational and coloured language is common in advertising in Hong Kong;
  2. The questionable wording “bloated” means nothing more than “expensive”;
  3. It was proven that PCCW’s products were more expensive than HKBN’s.

Based on the above, the Court held that the statements in the advertisements were true and not misleading. Although PCCW marks appeared in HKBN’s advertisements and refer the relevant public to HKBN’s service for the purpose of the comparison with PCCW’s service, it was fair and honest, especially when HKBN advertised their lower prices compared to PCCW’s.

In light thereof, the comparative advertising defence applied in this case.

Comment

This case is instructive as it highlights the application of “honest practices” in the defence of comparative advertising under the TMO. It is a balance among the rights of trade mark’s proprietors, competitors and consumers under fair competition. S.21 of the TMO protects the consumers’ interests by allowing honest practices of trade mark for comparative advertising. Brand owners are advised to add a clear disclaimer in advertisements to avoid misleading consumers and use a wording that is in line with the reputation of competitors so that consumers can make a decision as to whether the brand owners provide a better service than others.

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