May 10, 2007 Hong Kong LAWFUEL- The Law Newswire – International…

May 10, 2007 Hong Kong LAWFUEL- The Law Newswire – International companies are being forced to engage in expensive and time-consuming litigation because the Hong Kong
Companies Registry is not adequately protecting the rights of trademark
holders, according to international law firm Jones Day.

At a briefing in Hong Kong today, Sebastian Hughes, a solicitor from Jones
Day’s intellectual property practice, said that more and more well-known
brand owners are coming across bogus “shadow companies” doing business
under the guise of successful trademarks.

“These shadow companies are incorporated by Mainland Chinese shareholders
under Hong Kong’s liberal company registration procedure, using names that
comprise well-known trademarks,” Mr. Hughes said.

“The shadow companies are then used to create sham licenses or letters of
authorization claiming to sanction the use of the trademarks in China.”

Mr. Hughes said changes need to be made by both the Hong Kong Companies
Registry and the Hong Kong Government to prevent this growing problem. If
left un-tackled, Hong Kong’s position as the Asian hub for multinational
corporations could be jeopardized.

Changes required by the Hong Kong Companies Registry

While there are existing provisions under Hong Kong’s Companies Ordinance
for dealing with the problem of shadow companies, due to the Companies
Registry’s current interpretation of these provisions, well-known trademark
owners are being forced to commence litigation in Hong Kong.

“The Ordinance contains two provisions modeled on U.K. law which were
intended to prevent company name piracy,” Mr. Hughes said.

“In practice, however, the provisions do not support the rights of
trademark holders or protect unsuspecting consumers.”

The first provision prevents registration of a name if it is the same as or
too similar to an existing company name, but limits the time a legitimate
trademark owner has to file a complaint to 12 months. At present, the
Registry is rejecting all applications under this provision unless the name
in question is practically identical to an existing company name.

The second provision is designed to prevent harm to the public through
registration of a misleading company name. The Registry, however, has
placed the overriding emphasis upon the nature of the company’s activities,
rather than the misleading nature of its name, and applications under this
section are invariably unsuccessful.

Even when faced with evidence of deliberately misleading conduct, such as
the use of the company name in order to create bogus letters of
authorization, or apply for bank loans in Mainland China, or the
unauthorized use of well-known trademarks on company letterhead, the
Registry is refusing to require offending companies to change their names.

Changes required by the Hong Kong Government

Mr. Hughes said that, in addition to the changes required by the Companies
Registry, Hong Kong Legco should also amend the Companies Ordinance to set
up a company name adjudication system, whereby an independent adjudicator
would be chosen from a panel of independent experts.

“This would be similar to the system being introduced in the U.K., which
will empower an independent adjudicator to review company name disputes and
order offending company names to be changed.”

He said the Hong Kong Government should model the company name adjudication
system on the successful, speedy and cost-effective procedures adopted by
the various domain name Registries around the world for the resolution of
domain name disputes.
Currently, well-known trademark owners are successfully securing default
judgments against shadow companies for trademark infringement and/or
passing off through litigation in the Hong Kong courts.

Successful judgments include orders requiring the shadow companies to
change their names, as well as orders restraining them from using the
well-known marks in Hong Kong or elsewhere, including China.

“Resorting to litigation, however, can be a lengthy and costly process and
therefore it would be best if these potential trademark infringement
loopholes were filled in the company registration process,” Mr. Hughes

Jones Day is an international law firm with 30 locations in centers of
business and finance throughout the world. With more than 2,200 lawyers,
including more than 400 in Europe, and 200 in Asia, Jones Day ranks among
the world’s largest law firms. Jones Day acts as principal outside counsel
to, or provides significant legal representation for, more than half of the
Fortune Global 500 companies.

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