Two-stage test for honest concurrent use clarified

Hong Kong
In CSS Jewellery Company Limited v Registrar of Trademarks (Case 2602/2008, January 11 2010), in a dispute involving two renowned jewellers from the same family, the Court of First Instance of Hong Kong has set aside the decision of the registrar of trademarks and allowed the registration of a mark that the two jewellers had been using concurrently for a considerable period of time. 
 
CSS Jewellery Company Limited applied to register the trademark CHOW SANG SANG for jewellery and related services in Classes 14 and 35 of the Nice Classification. The registrar rejected the application, citing an earlier registration for the mark A CORPORATE GIFT IDEA BY CHOW SANG SANG, owned by Chow Sang Sang Jewellery Company Limited.
 
CSS and Chow Sang Sang branched out from the same company and are owned by the sons of the founder, Chow Fong Po. In the 1930s the family started a jewellery business in China under the trade name Chow Sang Sang (in Chinese characters). Subsequently, the founder, through an inter vivos settlement, distributed his assets among the two branches of his family: the sons of his wife took over the Hong Kong and Zhanjiang businesses (CSS), while the sons of his concubine took over the Macau business (Chow Sang Sang). The founder's will expressly stated that both branches could use the trade name Chow Sang Sang concurrently.      

Both branches then set up new shops using the words 'Chow Sang Sang' as part of their business names. Despite the existence of CSS's business in Hong Kong, Chow Sang Sang set up its first shop in Hong Kong in 1948. That business prospered over the years and was listed in Hong Kong in 1973. In 2008 Chow Sang Sang had 37 shops in Hong Kong and 120 shops in China, with an annual turnover of nearly HK$9.8 billion. CSS, on the other hand, owns only around 10 shops in Hong Kong. In recent years, the relationship between the two branches has become tense, and opposition proceedings concerning common or similar marks are pending before the registrar.
 
In the present case, CSS contended that there had been a honest concurrent use of the mark applied for and the cited mark within the meaning of Section 13(1)(a) of the Trademarks Ordinance. However, the registrar focused heavily on the increased risk of confusion and rejected CSS's arguments.

On appeal, the Court of First Instance overturned the registrar's decision. The court considered that "[it was] just, in all the circumstances of the case, to accept the application for registration" based on the honest concurrent use of the marks concerned. The court took the opportunity to clarify the two-stage test for honest concurrent use:

  • honest concurrent use must first be established; and
  • the registrar or the court must then consider whether to exercise their discretion to allow the application for registration.
The first stage involves a factual examination of three factors - namely:

  • use of the marks;
  • concurrent use; and
  • honesty of the concurrent use. 
Discretionary considerations, such as public interest and likelihood of confusion, do not come into play at this stage. Applying the first part of the test, the court considered that CSS had established honest concurrent use of the marks.         

During the second stage, the court should take into account all relevant considerations in exercising its discretion. The list of factors is not exhaustive, but public interest is always an important element. Other considerations include:

  • the extent of use of the marks;
  • the degree of confusion likely to ensue from the resemblance of the marks;
  • whether actual confusion has been demonstrated;
  • the inconvenience that would be caused should the mark be registered.
In the present case, due to the history of the marks, the court considered that the confusion (or risk of confusion) between the goods and services supplied by CSS and Chow Sang Sang had always existed. Therefore, the issue was whether the registration of CSS's mark would result in an increased risk of confusion. Having considered all the evidence (in particular, the fact that CSS used additional words in its Chinese trade name to dissociate itself from Chow Sang Sang), the court concluded that the increase in the risk of confusion was only moderate. The court also took into account the fact that:
  • CSS's use of the mark had been extensive and substantial; and
  • CSS's interests would be affected substantially if its application for registration was rejected (in particular, CSS would be at risk of an action for infringement).
Moreover, there would be no real prejudice to Chow Sang Sang, as the marks had already coexisted for some time.
 
Finally, the court concluded that it would be unjust to allow one branch of the family to have a monopoly over the CHOW SANG SANG mark, as both branches had been using it, in one form or another, for a lengthy period of time.

Kenny Wong and Anna Chu, JSM, Hong Kong

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