Historically, there have always been tensions in intellectual property law around how to balance the exclusive rights granted to intellectual property rights owners, while also allow for healthy competition between businesses to benefit consumers. One area where this tension is evident is in comparative advertising – e.g. where advertising materials identify a competitor, and identify a company's products or services as superior.
A recent judgment of the Hong Kong High Court ("Court") provides guidance on comparative advertising for the first time, including the interpretation of section 21 of the Trade Mark Ordinance (Cap. 559) ("TMO")13. In this case, the Court dismissed a trade mark infringement claim brought by the PCCW-HKT Group ("PCCW"), against its competitor, Hong Kong Broadband Network Limited ("HKBN")14. In doing so, the Court demonstrated support for comparative advertising, allowing more freedom for advertisers to highlight their companies' market advantages, and encouraging healthy competition.
In 2015, HKBN launched an advertising campaign with a number of catchphrases that included: "PCCW Home Telephone Service customers say goodbye to bloated monthly fees!" and "電訊盈科家居電話用戶唔駛再忍受 咁大食嘅家居電話用費". These catchphrases included trade marks registered by PCCW, such as "PCCW" and "電訊盈科" ("Marks").
There was no dispute by the parties that HKBN used the Marks. However, PCCW argued that HKBN had infringed PCCW's trade mark rights under sections 18(1) and (4) of TMO, as HKBN used the Marks in the course of business, thus taking unfair advantage of the reputation of the Marks. HKBN relied on section 21 of the TMO as a defence which states that there is no infringement of registered trade marks, if they are used in accordance with honest practices in industrial or commercial matters.
The factors that the Court may consider in determining "honest practices" include, in particular, whether:
- the use takes unfair advantage of the trade mark;
- the use is detrimental to the distinctive character or repute of the trade mark; or
- the use is such as to deceive the public.
PCCW claimed that HKBN's use of the Marks was not in accordance with honest practices in industrial or commercial matters. One of the reasons given to support this contention was the use in the advertisements of the expressions "bloated fees" and " 大食" (meaning gluttonous in Chinese).
HKBN rebutted this claim by asserting that a reasonable consumer reading the advertisements would likely take the view that the catchphrases used were honest15, true and not misleading, and that the use of "bloated" and "大食" (i.e. gluttonous) was just advertising language or puff, with no effect of discrediting PCCW, given the context of the advertisements.
The Court held that HKBN had successfully established a defence under section 21 of the TMO against PCCW's infringement claim, as the use of the Marks was in accordance with honest practices in industrial or commercial matters.
The Court also held that the purpose of comparative advertising is to identify the differences of services between competitors. Here, HKBN did not seek to use the Marks to benefit from their attributes or take a "free-ride", but was merely highlighting the price differences between the parties. Hence, there was no unfair advantage taken of the Marks.
In determining the meaning of "honest practices", the judge took into consideration the test of whether a reasonable man would take the claim in the advertisement to be one which was made seriously.16 The judge held that an average consumer in Hong Kong would be used to price comparisons of services, and would understand the words "bloated" and "大食" (i.e. gluttonous) as merely meaning "expensive" in more colourful language. Therefore, there was nothing unfair or dishonest when HKBN highlighted their reduced prices using the Marks and the expressions.
Comparative advertising is not explicitly prohibited under the Advertising Law of the People's Republic of China ("PRC")17, however, advertisements should not disparage ("貶低") the goods or services of any other producer or trader (Article 13) and should not engage in any form of unfair competition (Article 31).
While both Hong Kong and the PRC have not made direct references to the use of comparative advertising in their trade marks and/or advertising legislations, some jurisdictions in Asia-Pacific, such as Australia and Singapore have. The Australian Trade Marks Act exempts trade mark infringement in the context of comparative advertising.18 According to Australian case law, while there are no special principles that apply to comparative advertising, the facts in the advertisements must be true and accurate.19 As for Singapore, the Singaporean Trade Marks Act explicitly caters for the "fair use" of a registered trade mark in comparative advertising.20 One of the factors which the court will take into account when interpreting "fair use" is whether the average consumer would find the advertisement materially misleading.21
Both Hong Kong and the PRC have legislations to prevent the use of misleading information in advertisements. Under the Trade Description Ordinance (Cap. 362), any person who applies a false trade description (defined to include a misleading trade description22) in an advertisement in the course of trade or business, commits an offence.23 Similarly, under Article 8 of the Anti-Unfair Competition Law of the PRC, business operators may not promote their goods or services in a false or misleading manner, in an attempt to defraud or mislead consumers.24
In the recent PCCW/HKBN judgment, the Court's interpretation of the provision governing the use of a trade mark in advertising in Hong Kong demonstrates a support for comparative advertising, whilst also clarifying the test to be applied for a party to rely on the provision.
In a city that is unapologetically focused on a free market economy, business in Hong Kong is highly competitive. The support for comparative advertising aligns with Hong Kong's laissez-faire ideology. This should encourage fair competition, and also enable businesses to cater their goods or services to meet consumer demands and expectations.
15. Evidence was adduced to show that during the relevant period, PCCW's prices for fixed line telephone service were "largely" more expensive than HKBN.
16. A test established in the English case: Vodafone Group PLC v Orange Personal Communications Services Ltd  FSR 34.
17. Please refer to the Advertising Law of the PRC at: http://www.npc.gov.cn/npc/cwhhy/12jcwh/2015-04/25/content_1934594.htm (Chinese only)
18. Section 122(1)(d): "... a person does not infringe a registered trade mark when... the person uses the trade mark for the purposes of comparative advertising".
19. Gillette Australia Pty Ltd v Energizer Australia Pty Ltd  FCAFC 223.
20. Section 28(4)(a): "... a person who uses a registered trade mark does not infringe the trade mark if such use... constitutes fair use in comparative commercial advertising or promotion"
21. Allergan Inc. & Anor v Ferlandz Nutra Pte Ltd  SGHC 131
22. Section 2 of the Trade Description Ordinance.
23. Section 7(1) of the Trade Description Ordinance:
"... any person who – in the course of any trade or
business— (i) applies a false trade description to any goods;
or (ii) supplies or offers to supply any goods to which a false
trade description is applied... commits an offence".
Section 8(1) of the Trade Description Ordinance: "The following provisions of this section shall have effect where in an advertisement a trade description is used in relation to any class of goods or services."
Section 8(2) of the Trade Description Ordinance: "The trade description is to be taken as referring to all goods or services... for the purpose of determining whether an offence has been committed under section 7(1)(a)(i)"
24. Please refer to the Anti-Unfair Competition Law of the PRC at: http://www.npc.gov.cn/npc/xinwen/2017-11/04/content_2031432.htm (Chinese only).
Visit us at www.mayerbrownjsm.com
Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2018. The Mayer Brown Practices. All rights reserved.
This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.