Hong Kong Court Imposes Punitive Costs In Failed IP Claim Against Alibaba Citing Forum Shopping And Non-Disclosure

• Published date: 13 May 2022
• Subject Matter: Corporate/Commercial Law, Intellectual Property, Corporate and Company Law, Trademark
• Law Firm: Herbert Smith Freehills
• Author: Ms May Tai and Jojo Fan

Judgment is a timely reminder of the territorial limits of IP rights as indemnity costs awarded to Chinese tech giant

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 (IP) 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 (CFI) awarded indemnity costs against the plaintiffs for attempting to establish local jurisdiction under the guise of IP 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 sought permission to appeal against the decision but was also refused unanimously by the Court of Appeal recently in [2022] HKCA 360.

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

While the judge recognised there may be legitimate reasons for a brand owner to commence an action in Hong Kong as opposed to mainland equivalents, this case is certainly not one that should have been brought in Hong Kong.

In short: trademark owners must take great care when bringing IP claims in a jurisdiction with limited connection to their claims. This decision also sends a clear warning that a litigant risks a punitive indemnity costs order if they attempt to launch claims at an inappropriate forum and choose not to give full disclosure when making an ex parte application, where the other party is unaware of the legal process.

The case in depth - The background

The plaintiffs are a group that market skin care and cosmetics products under the trademark of "Mary Kay" through the direct-selling or network-marketing model. This meant the plaintiffs' representatives can only market their products by direct sales and are prohibited from selling those products at retail levels, including online forums.

The first to third defendants (D1 to D3) belong to the Chinese technology giant 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 fourth defendant (D4) and fifth defendant (D5) are mainland Chinese companies that...