Hong Kong Court Awards Indemnity Costs To Alibaba Group Due To Plaintiffs' Material Non-Disclosure And Forum Shopping

• Published date: 10 May 2022
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Trademark, Trials & Appeals & Compensation
• Law Firm: Herbert Smith Freehills
• Author: Ms May Tai and Jojo Fan

The internet is borderless, but trademarks are not. A recent Hong Kong case serves as a reminder of the territorial nature and limitation of intellectual property rights.

In Mary Kay Inc and Others v Zhejiang Tmall Network Co, Ltd and Others [2021] HKCFI 1403, the Hong Kong Court of First Instance awarded indemnity costs against the plaintiffs for attempting to establish jurisdiction in Hong Kong under the guise of intellectual property infringement for a complaint not recognised under Hong Kong law and for failing to disclose material matters when making an ex parte application for leave to serve proceedings out of jurisdiction. The plaintiffs subsequently attempted to seek permission from the Court of Appeal to appeal against the first instance decision but leave to appeal was also refused unanimously by the Court of Appeal recently in [2022] HKCA 360.

The first instance judge, notably, had held that the case marks another attempt by a brand owner to use the Hong Kong court to establish jurisdiction for alleged infringing activities that have mainly occurred in mainland China.

Whilst the judge recognised that there may be a lot of legitimate and strategic reasons for a brand owner to commence an action in Hong Kong as opposed to the Mainland court, this case is certainly not one that should have been brought in Hong Kong.

Trademark owners must take great care when bringing intellectual property claims in a jurisdiction that has limited connection to their claims.

This decision also sends a clear warning that a litigant risks an indemnity costs order if they attempt to commence claims at an inappropriate forum and deliberately choose not to give full and frank disclosure when making an ex parte application.

Background

The plaintiffs are a group carrying on business in the marketing of skin care and cosmetics products under the trademark of "Mary Kay" through the "direct-selling" or "network-marketing" model. In other words, the plaintiffs' direct sale representatives can only sell the plaintiffs' products by direct selling and are prohibited from selling those products at retail levels including online.

The 1st to 3rd Defendants belong to the Alibaba Group, which operates e-commerce platforms including Taobao and Tmall (D1 and D2, together the two Tmall Companies; D1 to D3, together the Alibaba Group Companies). The 4th Defendant (D4) and the 5th Defendant (D5) are Mainland Chinese companies that operated shops on Tmall.

Plaintiffs' claims were for...