HONG KONG COMPANIES REGISTRY: STARTING TO FEEL

UNCLAS SECTION 01 OF 02 HONG KONG 001600 SIPDIS SENSITIVE SIPDIS STATE FOR EB/TPP/MTA/IPC/FELSING STATE FOR EB/IPE STATE FOR EAP/CM STATE FOR INR/EAP DEPT PASS USTR FOR SMCCOY, ACELICO, RBAE DEPT PASS TO USPTO FOR TBROWNING E.O. 12958: N/A TAGS: CH ECON ETRD HK KIPR SUBJECT: HONG KONG COMPANIES REGISTRY: STARTING TO FEEL THE HEAT ¶1. (SBU) SUMMARY: Alan Fong, Assistant Principal Solicitor at the Hong Kong Companies Registry, acknowledged to EconOff that Hong Kong's quick and efficient corporate registration procedures -- heretofore believed by the Registrar to be plus -- is bringing unwanted attention on the Hong Kong government (HKG) for facilitating intellectual property theft in Mainland China. Numerous foreign governments and private associations are pressuring the Companies Registry to find a solution to this loophole in the Hong Kong's Companies Ordinance and other legislation. As part of a government reshuffling for Chief Executive Donald Tsang's second administration, Gordon Jones, the current Registrar of Companies, will be relieved of his duties in August 2007. While Fong believes the complete revision of the Companies Ordinance, scheduled for 2012, will resolve the issue permanently, the HKG is considering expanding the use of the "Anheuser-Busch" solution, a recent legal ruling in which Anheuser-Busch obtained court orders against nine infringing companies to change their names. In this case, the High Court of Hong Kong allowed Anheuser-Busch's lawyers to change the name of these companies when they failed to comply with the court order. Since rightsholders have criticized the Anheuser-Busch remedy as a costly and reactive solution, the Companies Registry is also exploring the possibility of checking all proposed company names on future registration applications with the HKG's defensive trademark registry before allowing an entity to incorporate in Hong Kong. While this second remedy might not help resolve existing cases and fails to provide protection for all brands, it could help prevent some future instances of company name theft. Most importantly, however, these proposals indicate that the Companies Registry now recognizes it has a problem and is willing to consider alternative approaches. (NOTE: AmConGen Hong Kong has been coordinating with the Japanese, EU and French missions to increase pressure on the HKG to resolve this issue and has urged local chambers of commerce to do the same.) END SUMMARY. ¶2. (SBU) Background: Hong Kong's company registration �A;procedures have received much criticism by Japanese, U.S. and European stakeholders due to their lack of protection for well-known brand names and trademarks. For the past decade, mainland Chinese shadow companies have used loopholes in Hong Kong's company incorporation process to register international brand names as part of their own corporate name when they establish a business in Hong Kong. For example, the Company Registry would allow a company to register itself as "Hong Kong Coca Cola International, Ltd" even though it has no relationship to the soft drink maker. These companies then use the Hong Kong entity to deceive mainland Chinese consumers into believing their products are affiliated with a well-known and respected foreign brand. American companies, such as Anheuser-Busch, Time Warner, Disney, Coca-Cola, Playboy, Revlon, Colgate-Palmolive and others, have been impacted as have a variety of European and Japanese brand names ¶3. (U) Under current Hong Kong law, there is no requirement for the Companies Registry to check company names for trademark infringement prior to incorporation. After incorporation, the Companies Registry has a twelve-month period after registration when it can direct a company to change its name if it finds that the proposed name is "too like" one that has already been registered. However, its definition of "too like" has been criticized as extremely narrow and rigid. It also is up to legitimate brand-owners to inform the Companies Registry of possible infringement within this twelve-month period. Legitimate brand owners have also taken shadow companies to court to obtain a court-ordered name change, but Hong Kong law requires that shareholders of a company make a special corporate resolution to enact any legal name change. Without this resolution, the Companies Registry claims it is not authorized to recognize or enact any changes. As a result, shareholders of infringing companies have successfully and indefinitely delayed court-ordered changes to their names and/or company registration documents. ¶4. (U) However, Anheuser-Busch recently forced nine infringing shadow companies to change their names. In an innovative solution, Anheuser-Busch obtained a court order requiring name changes for the shadow companies. Based on a HONG KONG 00001600 002 OF 002 2004 case from the English Court of Appeal (Halifax and others vs. Halifax Repossessions Ltd & others),the court subsequently granted Anheuser-Busch's lawyers the power to serve as directors and shareholders of the infringing companies. When the defendants failed to change their names, Anheuser-Busch's lawyers signed the special resolutions necessary for the change. The Companies Registry then accepted these resolutions as having the same legal status as those passed by the actual shareholders of the infringing companies. While this solution addresses some brand owner concerns, it is a costly and reactive remedy to brand name infringement. Local stakeholders have urged the Companies Registry to adopt a trademark or brand registration check before a company can register; however, Gordon Jones, the Registrar of Companies, has resisted such an approach as it would delay and complicate registration procedures. ¶5. (SBU) Fong noted that the Companies Registry is under increasing pressure from foreign governments, including the U.S., Japanese, French, Dutch and EU missions. Local Chambers of Commerce and members of the Hong Kong Law Society have also raised this issue. Fong told EconOff that the HKG will replace Jones in August, most likely by someone from outside the Companies Registry. Furthermore, Fong said that the Companies Registry is considering working with the Intellectual Property Department (IPD) to gain access to Hong Kong's defensive trademark registry. If an applicant proposes a company name that is similar to one found on the Hong Kong defensive trademark registry, the Companies Registry would then require that applicant to provide proof of a legal relationship to the trademark owner. This solution, he predicted, would not create lengthy delays for most applicants, but provide legitimate companies with slightly higher protection for their brands. IPD has urged the Companies Registry to close this loophole in registration procedures and, as such, would likely agree to share its defensive trademark database. Fong and others are now considering the legal and privacy implications of sharing information between two separate HKG departments. He notes that previous cross-departmental data sharing have been controversial in Hong Kong, but believes that the two departments can find a way to overcome data-sharing concerns since they are both under pressure to resolve the issue. ¶6. (SBU) Anita Leung, former AmCham IP Committee Chairperson and a recent appointee to a Companies Registry advisory body, said that the current proposals do not address the main issue, which is the HKG's narrow definition of "too like." Nonetheless, she said that the proposals at least indicate that the Companies Registry now recognizes its policies cause larger problems for the HKG. She hopes the new Registrar of Companies will show dynamic leadership and an ability to push the bureaucracy to find a solution that facilitates the registration of legitimate companies, while providing adequate protection for both local and international brand names. Cunningham